deduct mortgage interest ?

My situation is like this. I refinance my canadian home so I get cash to buy a rental property in Arizona, US. So I pay mortgage interest in Canada. My question is: Can I deduct mortgage interest from the rental income from Arizona? Thanks, Jim I am Canadian. I am not US citizen.

Public Comments

  1. To the extent the proceeds of the refi were used to purchase the income property, you can deduct the interest as an expense on Schedule E. Use Schedule E to report your rental income and expenses. If there are additional proceeds that you received from the refi, you can (almost always) deduct the interest on up to $100K of that debt. There are a few exceptions (your debt must be actually backed by equity in your home, and your debt on your home must not exceed $1 million). The above refers to a taxpayer subject to US income tax.
  2. No, you can not deduct mortgage interest from rental income. Mortgage interest deduction is itemized deduction and is claimed on schedule A (Form 1040). Read about itemized deduction: http://taxipay.blogspot.com/2008/05/itemized-deductions.html
  3. If you use the money for a business purpose, you must allocate the interest to the purpose used. The interest is deductible on schedule E (rental income). IRS pub 535. Keep notes--you convert the amount paid to USD on the day you pay it in Canadian dollars. IRS pub 54. Of course it would help to know if you are a US citizen or resident or not.
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