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Canadian Specific
My husband and I own a townhouse that we rent out and a house in which we rent out the upper floor. I put in about 70% of the downpayment for the townhouse and the equity from the townhouse was used to purchase the house. My income is much less than my husbands. The townhouse is rented at a loss and the approx 60% of the house that we rent out is generating a profit. Is it possible to claim that the equity removed from the townhouse was 100% mine? This would leave me with house which is generating a profit and my husband with the townhouse which is making a loss. Or will we have to claim ownership 70-30% on both properties?
Thanks
CXXXXXXXXXXXXXXX
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David Ingram replies:
I bet that the reason that the townhouse is rented at a loss is that you borrowed money on the townhouse to use as a down payment on the house.
If this is so, the interest on that loan is NOT deductible against the rent from the townhouse. It a deduction against the rental house or rather should be pro-rated between the personal and rental parts of the house.
You need to talk to someone like me to determines the deduction order.
With interest as a deduction, it is not what you could have done but what you did that makes the deduction. Goto www.centa.com and read the November 2001 Newsletter on making mortgage deductible. From what you have stated, we can make all your interest deductible for someone but you will need to re-arrange some of your paper.
Depending upon what you did, you might be able to do the equity removal from the townhouse but I do not think you can from what you have told me so far.
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