Taking out a loan against your primary residence could benefit your tax situation in a couple of ways, but you should talk with your tax advisor. Full disclosure…although my degree was in accounting 30 years ago, I have never practiced as an accountant. Be sure to talk with your tax advisor for what I am about to tell you.
There are a couple of ways that you could benefit. First, taking out a mortgage against your home should allow you to reduce your adjusted gross income by the amount of the interest that you are paying for the loan. Your best bet, however, might be to expense the interest you pay on your Schedule E as an expense against your rental income. Of course, you might have formed an LLC for the property. Then you would deduct the interest on the LLC’s return as a legitimate expense against the property’s income.
Once again, I am not an accountant and to not purport to be one. You should always discuss your particular tax situation with your tax advisor.