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    goodmama1's Avatar
    goodmama1 Posts: 11, Reputation: 1
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    #1

    Apr 15, 2006, 08:14 AM
    2nd Mortg. As Bal Transfer on CC
    My second mortgage is variable rate and now sits at more than 8%. I have great credit and now hold a credit card offer to transfer any balance at 3.9% fixed for the life of the balance. If I transfer part or all my second mortgage to this CC in order to take advantage of the interest savings without refinancing, and that is the ONLY thing on the account, can I deduct the interest on the CC account next year on my taxes?
    RickJ's Avatar
    RickJ Posts: 7,762, Reputation: 864
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    #2

    Apr 15, 2006, 10:05 AM
    I give it a 99% yes... but will move this to the Taxes board so our Taxes Expert can take a look at it.
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,301, Reputation: 7692
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    #3

    Apr 15, 2006, 12:41 PM
    I would say no Rick, since once it is transferred to a CC it is no longer a home loan, since the CC is not basing its lending on house equity.

    But then that is why we pay the CPA the big bucks to find those loop holes for us.
    taxsearcher's Avatar
    taxsearcher Posts: 222, Reputation: 8
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    #4

    Apr 15, 2006, 02:34 PM
    Fr Chuck is correct. The debt needs to be secured by a qualifying residence. See the following information:

    http://www.irs.gov/publications/p936/ar02.html#d0e182



    Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan.

    You can deduct home mortgage interest only if you meet all the following conditions.

    You must file Form 1040 and itemize deductions on Schedule A (Form 1040).

    You must be legally liable for the loan. You cannot deduct payments you make for someone else if you are not legally liable to make them. Both you and the lender must intend that the loan be repaid. In addition, there must be a true debtor-creditor relationship between you and the lender.

    The mortgage must be a secured debt on a qualified home. “Secured debt” and “qualified home” are explained later.

    *****

    Secured Debt
    You can deduct your home mortgage interest only if your mortgage is a secured debt. A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that:

    Makes your ownership in a qualified home security for payment of the debt,

    Provides, in case of default, that your home could satisfy the debt, and

    Is recorded or is otherwise perfected under any state or local law that applies.


    In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. In this publication, mortgage will refer to secured debt.

    Debt not secured by home. A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien).

    A debt is not secured by your home if it once was, but is no longer secured by your home.
    RickJ's Avatar
    RickJ Posts: 7,762, Reputation: 864
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    #5

    Apr 15, 2006, 02:56 PM
    I'll stand corrected. Glad you guys posted!
    vaya's Avatar
    vaya Posts: 55, Reputation: 1
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    #6

    Apr 15, 2006, 03:26 PM
    You could deduct it if you receive 1098, Mortgage Interest Statement. Now ask your cc company if it will issue the form.

    Vaya
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,301, Reputation: 7692
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    #7

    Apr 15, 2006, 04:34 PM
    Now the one thought, you go to your second mortgage holder, show them the interest rate on the credit card, and negotiage a better rate.
    Let them know that while you don't want to move your business, that you have to look for the lowest interest available.
    Who knows they may lower your overall rate some. I look at a lot of my business, car and house insurance, interst rates, cabel TV rates, cell phone rates and the such once every year to year /half.

    I look at my interest rates on loans every 2 to 3 years.
    One would be surprised how "shoping" can get you interest rates or intro prices even if you are not new to them
    taxsearcher's Avatar
    taxsearcher Posts: 222, Reputation: 8
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    #8

    Apr 15, 2006, 07:06 PM
    Vaya, the CC company should only issue that if the CC debt is secured by the home. Presumably it is not in this case. If it is, that's fine.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
     
    #9

    Apr 15, 2006, 10:44 PM
    All the above comments are valid! I have nothing to add.
    goodmama1's Avatar
    goodmama1 Posts: 11, Reputation: 1
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    #10

    Apr 19, 2006, 05:19 AM
    Thanks for all your info! I did negotiate a slightly lower rate with my second mortgage holder. I went from prime + 1 to prime + 0. My CC company says they can't issue a 1098 so if I decide to transfer any of the balance to them, I'll be out the tax savings. What math do I need to do to determine whether I actually save more by placing a portion at 3.99% rather than at prime with a tax deduction?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
     
    #11

    Apr 19, 2006, 01:10 PM
    That's a pretty complex calculation, as it involves not only the difference in interest rates, but your marginal tax rate.

    You might try one of the financial websites, like The Motley Fool (www.fool.com) or SmartMoney.com to see if they have the calculator needed for that computation.

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