Claiming canadian loan interest in US

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marvinsilva
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Claiming canadian loan interest in US

Post by marvinsilva » Wed Apr 03, 2013 11:03 am

I bought a house in the US using an home equity loan from Canada. I would like to know how I can claim in my US tax the interest rate I paid last year. I live in the US in that house. How can I prove that I paid the intetest if I dont have any special receipt from the canadian bank? I appreaciate all your comments. Marvin

JGCA
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Post by JGCA » Wed Apr 03, 2013 12:18 pm

The real answer is no, it has to be secured by a mortgage on the property, but many client in your situation claim it and have never been challenged since no audit was initiated.
JG

nelsona
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Post by nelsona » Wed Apr 03, 2013 2:27 pm

Actually, IRS rules allow ALL interest from mortgage or equity loans secured on your propierty to nbe usued towrds the mortgage deduction, regardless of what it was used for.

So, yes, you can.
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nelsona
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Post by nelsona » Wed Apr 03, 2013 2:35 pm

Just so we are clear, ALL interest from mortgages or home equity lines that are secured on your main or second home are eligible for the mortgage interest deduction. This would be whether the funds were used to by another home, investments, or bubble gum.
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JGCA
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Post by JGCA » Wed Apr 03, 2013 2:45 pm

If it is secured it is, I did not see the home in Canada was secured since it seems to be it would be allowed
JG

marvinsilva
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Post by marvinsilva » Wed Apr 03, 2013 2:47 pm

Thanks Nelsona. What document do I need from the canadian bank to show the interest I paid last year? I have my monthly statements, but I dont know if that is an official document. The canadian bank does not issue a form 1098. How can claim that interest deduction in my US income tax?
Nica

marvinsilva
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Post by marvinsilva » Wed Apr 03, 2013 2:49 pm

The home equity loan is secured from my second property in Canada.
Nica

nelsona
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Post by nelsona » Wed Apr 03, 2013 3:10 pm

No official documentation, you need to keep records.
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JGCA
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Post by JGCA » Wed Apr 03, 2013 4:11 pm

The interest is deductible but not ALL as previously stated there are limits that apply if you file MFJ its up to $ 100,000 of debt if you file Seperate its $50,000 of debt so it may or may not be ALL of the interest you paid on the equity line and it depends on the FMV of the property less the amounts above. If your below this then ALL the interest is deductible if you are over only a portion.
JG

nelsona
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Post by nelsona » Wed Apr 03, 2013 4:24 pm

So, JG, you went from 0 deductible to $100,000 loan deductible. Care to go any higher?

The limit is only for loans NOT used to buy the first or second home.
In this case, since the equity line was used to buy second home, it can be said to be home acquisition loan rather than home equity loan.

Its a little grey area, but I'm quite sure that if they put ALL the interest, it will not be questionned.
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nelsona
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Post by nelsona » Wed Apr 03, 2013 4:26 pm

In other words, the loan was secured agianst one qualifying property to buty another. This is 100% deductible interest.
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JGCA
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Post by JGCA » Wed Apr 03, 2013 5:18 pm

Dear Nelsona

I did not go from 0 to 100%, I said it had to be secured by a mortgage, and seeing how the Cnd home is securing it I said that should be sufficient, it was a quick read and the equity line obviously was a mortgage backed loan. As for the 100K it is a grey area which I feel l applies be as it may it probably will fly but be as it may its grey not black and white but I am an accountant that would put it in as long as the client knows the facts.

No need to get nasty on this you pointed out a good argument that I agree the poster should take a shot why not.
JG

nelsona
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Post by nelsona » Wed Apr 03, 2013 5:34 pm

Shot? What shot? You said no, and then you said yes.

Du calme, mon vieux!
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JGCA
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Post by JGCA » Wed Apr 03, 2013 5:38 pm

Im in too deep with tax filings right now to play games ., and I am certain you have better things to do. So leave it at that.
JG

nelsona
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Post by nelsona » Wed Apr 03, 2013 5:41 pm

So, just so we are clear: you said for interest dedutibility " it has to be secured by a mortgage on the property".

This was incorrect. It can be secured on either a first or second home. The property in question doesn't factor into it.
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