Ron Peterson wrote:
> On Apr 28, 10:58 am, Mark Bole <ma...@[EMAIL PROTECTED]
> wrote:
>
>>> Mortgage debt on a principal home, on the other hand, does allow a tax
>>> deduction for the interest.
>
>> Subject to a number of restrictions.
>
> I see that there are income restrictions and restrictions as to the
> amount of the mortgage.
Schedule A limitations based on income, yes. Also, only first and
second home qualify. Also, you have to keep track of acquisition vs.
equity debt, the law is designed to prevent endlessly refinancing your
equity and still fully deducting all interest.
>> There is a general concept of proceeds tracing. To survive a tax
audit,
>> you should be able to show that loan proceeds for which you want to
>> deduct interest were not mingled with other funds used for
>> non-deductible personal expenses. This involves having separate bank
>> accounts, making close-in-time transactions, and so on, similar to the
>> rules for tracing separate property in states where marriages are
>> subject to community property rules.
>
> One should then avoid purchasing a vehicle directly from a brokerage
> account that has a loan against the stock, but i am not sure how to
> free up the cash without selling stock.
That's the whole point of the law: personal interest to buy a car is not
deductible. Interest on money borrowed *directly* for investment
purposes is.
As previously mentioned, tax consequences are just one of many factors
in determining whether borrowing money makes sense.
-Mark Bole
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