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I own a home that was my primary residence for 20 years. Since I
never refinanced and given the appreciation, I now have a very small
amount left on the mortgage and a great deal of principal in the
property. My husband owns a recently purchased home which is
heavily mortgaged and which is now our primary residence while my
property is rented out and bringing in a very nice income. My
question is which would give me the better tax break - a larger
mortgage on the primary residence or on the rental property. I could
easily mortgage either one and totally pay off the other. Our income
is in the 31% bracket.

This is a tough one to answer due to the phase-out of deductions for high income people. Without that it wouln't make any difference if you otherwise could take deductions (Schedule A). The interest expense on the rental would be the same as a personal deduction for home mortgage, however, as rental interest it would be a larger deduction from net income if you can't take deductions, or are subject to the phase-out. ed
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