Refinancing loan tax implications

Just wondering if anyone can answer this question.

I have 3 loans that I am looking to refinance with another bank and consolidate into 1 loan.

Loan 1: 200K Used to purchase IP1
Loan 2: 90K used to build granny flat for IP1.
Loan 3: Line of Credit loan $170K with only $40K used which was used to pull out some of the equity from IP1.

Now Loan 3 was actually used to renovate a bathroom and purchase a boat. My question is really can I consolidate these into a 1 loan of approx. $330K and then claim all the interest against IP1 although not all the funds were used for IP1???

At the moment only claiming interest on Loan 1 and Loan 2

 

No. Only interest expenses incurred for an income-producing purpose are deductible. So Loan 1 & 2 could be. Loan 3 is now a mixed purpose loan & will be a messy affair trying to split the deductible (bathroom) and the non-deductible (boat) but MAY be possible.

My opinion only. Seek proper tax advice.

 

No - tax deductibility of interest follows the use of monies not the security.

 

I'm so glad you asked about this prior to doing it.

Was the bathroom in the IP? If so you can probably claim the interest on that part, but most likely not the boat unless it's income producing.

Regardless, you're best off keeping separate loan splits for each purpose. It just makes life so much easier come tax time, and if you're ever audited, the clearer things are the easier it'll be.

 

That's were I go it wrong. So it follows the use of monies no the security.

Based on your advise it would definitely make sense to keep them all separate.

Thanks