Legal Question in Tax Law in North Carolina

I live in North Carolina and plan to buy a house in South Carolina. The house is a "fixer upper" for $21,000 and I will be renting it. I wanted to borrow from my 401K and pay cash but need to know, can I claim the interest in the first year or any year thereafter for the tax advantages, and then claim rental expenses each year thereafter?


Asked on 7/29/13, 5:23 am

1 Answer from Attorneys
Kenneth Love Ken Love Law

You claim the rental costs on schedule K...the mortgage payments with interest get counted with the schedule K. You indicated that you borrowing from a 401k. It is better to take out a traditional mortgage for this than to borrow from your 401k. Because you are essentially paying the interest back to yourself, the IRS will disallow your claim when they caught it.

Also, make sure you know what you are getting into, renting properties is not a big profit maker unless you have a number of properties.

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Answered on 7/29/13, 8:11 am


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