Can I continue to deduct interest from my new home primary mortgage for that portion remaining that was used to purchase the rental property?

[Landlord-John]

I used a home equity line of credit as down payment on a rental property and have been deducting interest. 

If I sell my primary residence then the loc is paid off.  However, if I am purchasing a new home, the portion that I was paying is now rolled into a new mortgage.  

I want to keep deducting interest on the amount remaining that was used to purchase the rental. 

Can I pro-rate a portion of my new home mortgage insurance that now includes the paid off loc after the sale?

[TurboTaxKim]

If your new mortgage assumes the Home Equity Line of Credit (HELOC) used to finance your rental property, you should make sure you have all your figures and documentation available when continuing to claim the interest paid. CRA may require you to produce documentation to support your claim and prove that the interest paid is not for “personal use”.

The following example comes from the CRA documentation for Rental Properties regarding Interest & Bank Charges and speaks about “refinancing your rental property”:

“You might refinance your rental property to get money for a reason other than buying or improving your rental property.

If you use the funds for a business or other investments, you may be able to claim the interest expenses on Schedule 4, Statement of Investment Income. Go to line 221 - Carrying charges and interest expenses, or "Expenses" section of form T2125.

If the funds are for personal use, you cannot deduct the interest expenses”.

Source: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form...

Have a look at our TurboTax Tip and this link for some examples that sound similar to your own situation.

·       https://turbotax.intuit.ca/tips/tax-deductions-on-rental-properties-6382

·       http://myreinspace.com/threads/refinancing-rental-propertires.2281/