Hi guys, I have a tax deduction question that I’ve not seen asked before.
Last financial year, my mother-in-law took out a LOC against her fully paid off IP. We borrowed from her LOC $70,000 to use as a deposit for purchasing an IP. Is the interest charged to her on this $70000 tax deductible for us? I assume it is seeing we are borrowing this money to buy an IP. However, the LOC is obviously in her name, so I’m unsure. My accountant says it’s okay because of the purpose of the loan but I would like a second opinion.
Does anyone have a simple answer?Mark CoburnParticipant@mark-coburnJoin Date: 2006Post Count: 181
Listen to your accountant, he has the full picture and understands your position. But having said that the answer is clearly yes if you consider the purpose of the LOC.
Thanks for answering Mark. I had some bad advice from a previous accountant so I am a bit wary this time. I didn’t want to claim for something that I wasn’t entitled to so I wanted to double check.Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
When you say “us” do you mean yourself and mum or just you mum?
If she’s the only one on the title for the IP that the LOC was taken out against – I’d assume she’s the only one that can claim it as a deduction.
Sorry but I think I made the question confusing and misleading. My mother-in-law took out a LOC; my partner and I bought an IP using $70000 borrowed from that LOC. My mother-in-law has nothing to do with the IP my partner and I purchased. Does that make sense? She lent us that $70000 taken from her LOC. Only my partner’s and my name are on the title of the IP.
Anyone else with an answer?Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Yes the interest would be Tax deductible at the rate your Mother in law is charging you.
I assume that this is the same rate as she is paying on her loan.
Fairly standard way of structuring.
Yours in Finance
Thanks for your answer Richard. I’m still learning about the intracacies of property investing and learning a lot on these forums. Cheers!Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069