Technical topics regarding tax preparation.
15-Oct-2021 10:20am
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The taxpayer has a second mortgage on his principal residence that he wants to pay off. He borrows money from his brokerage account (securing the loan with his investments in the brokerage account) and pays off the second mortgage loan.. OK, let's use these facts.
Since the brokerage loan is not secured by the principal residence, it doesn’t qualify as home mortgage interest.. And this, too, is true.
But doesn't he get an interest deduction for the interest accrued on the home mortgage, the payment of which interest was directly from the margin loan?
15-Oct-2021 10:24am
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Nilodop wrote:But doesn't he get an interest deduction for the interest accrued on the home mortgage, the payment of which interest was directly from the margin loan?
What interest on the home mortgage loan? It's been paid off, so there isn't any interest anymore.
15-Oct-2021 10:39am
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The interest on the home mortgage that had accrued but not paid as of the payoff date.
15-Oct-2021 10:45am
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If you're referring to the interest on the 2nd mortgage loan that accrued before the brokerage account loan paid off the 2nd mortgage loan, I don't see that the payoff affects that. If the 2nd mortgage loan is acquisition indebtedness, then the interest is deductible as long it is below the maximums in 163(h)(3).
15-Oct-2021 10:49am
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For two people that agree, we are doing an excellent ob of talking right past each other.
Yes, it's
the interest on the 2nd mortgage loan that accrued before the brokerage account loan paid off the 2nd mortgage loan. It gets deducted on the cash method when it's paid by the proceeds from the margin loan.
15-Oct-2021 10:57am
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I don't think we're talking past each other. We agree that the interest that accrued on the 2nd mortgage loan before it was paid off by the brokerage account loan is deductible, even if that interest was paid by the proceeds from the brokerage account loan.
The question that OP is asking is whether the interest on the brokerage account loan is deductible, and we agree that it's not.
15-Oct-2021 12:37pm
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I know that. But I brought it up in case it got overlooked as well as because (apparently mainly to me) the facts as presented) were fuzzy.
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