Hi Team,
I would like to know if changing ownership structure from ‘Joint tenant’ to ‘Tenancy in Common’ is considered a ‘private purpose’ when claiming interest paid on a loan as a deduction.
Currently me and my partner own a property valued at $1m, has nil debt, and is currently owned by us as ‘Joint Tenant’, i.e. ownership is 50-50 between myself and my partner.
We want to change ownership to ‘Tenancy in Common’, i.e I will own 99% and partner will own 1%. To enable this change, I will have to take out a loan against the property to pay my partner his share of the total ownership, i.e. $499k (49% of $1m).
Currently the property is our primary place of residence.
If in the future I transition the property to an investment, will the interest paid on outstanding loan balance be tax deductible?
I am unsure if the loan taken out to pay my partner his share will be considered as ‘private purpose’ and, hence, interest paid on that loan is disallowed once the property does transition to an investment property.
Thank you
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