I am seeking clarification regarding the tax treatment of interest deductions following a divorce property settlement.
My spouse and I currently jointly own two properties, both in our joint names (50/50) and with joint loans (50/50):
- One principal place of residence (PPOR)
- One investment property
As part of our divorce settlement, we have agreed that:
- My spouse will retain full ownership of the PPOR
- I will take full ownership of the investment property
The titles will be transferred accordingly under the property settlement, and we will also refinance the existing loans so that each loan is in a single name.
For the investment property, the current outstanding loan balance is approximately $500,000.
My question is:
After the divorce property settlement and refinance, will the interest on the $500,000 loan be fully (100%) tax deductible to me, assuming the property continues to be used as an income-producing investment? Or will only 50% of the interest remain deductible due to the original joint ownership structure?
Thank you for your assistance.
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