Question about deductibility of interest

Hi, probably a silly question….
If money is borrowed to pay for a deductible expense for a rental property, is the interest deductible as well?

 

Answered here
Tax Tip 4: Borrowing to Pay investment expenses Tax Tip 4: Borrowing to Pay investment expenses

Even if you borrow to pay a non-deductible expense for an investment property the interest could potentially be deductible.

 

Thanks Terry, I should have expected that the answer was in one of your great tax tips.

I’ll read the whole thread later on, does it also talk about for which non deductible expenses interest is deductible?

For such expenses, I have set up a split on my home loan with associated offset account, have repaid it almost in full (less $1 just to keep it open), then redrawn the full amount, and deposited in the associated offset which I’m going to use only to pay expenses for the investment property. In this way I will be able to claim the whole interest on that split, right?

 

In that case you might want to read my Tax Tip 1
Tax Tip 1: Parking borrowed money in an offset account https://bit.ly/33l4o4c

You could potentially borrow to pay stamp duty - which isnt deductible but the interest on a loan used to pay it could be

 

Sorry my question wasn’t clear, I meant to ask if interest is also always deductible when associated with expenses not immediately fully deductible, i.e. improvements and similar, which I believe would be classified as capital expenses.

 

It wouldn't always be deductible, but if you borrow for an expense associated with a property that is income producing it generally would be.

 

is it safe to assume that interest accrued on money borrowed to pay for improvement expenses is always deductible?

 

no

Tax Tip 4: Borrowing to Pay investment expenses

 

It could be BUT many issues can affect the full, partial or even all deductibility. Now or later