Allocate mort. interest to Sched F?

[PapaTony]

The client lives on a small hazelnut farm that operates at a near break even. The client also has separate W2 wages unrelated to the farm. Do we have to allocate the primary home mortgage interest between the sched A and F, or do we take whatever is more beneficial to the client?

[Gretel]

You can report all mortgage interest on Sch. A, or prorate between Sch. A and Sch. F if you make the elections to treat secured mortgage interest as non secured mortgage interest.

What you cannot do is to switch back and forth. Once this election is made you are stuck with it unless circumstances change.

[Lion]

Oih

Maybe OIH would be beneficial...

[Larmil]

The counties in my state will allocate the real estate tax. Why not use the same percentage on the mortgage interest?

[taxea]

If he isn't growing the hazelnuts inside the house and doesn't have a home office for the business, I would put it on Sch A. If he uses a home office he certainly would benefit more by taking the expenses that go with it on the Sch F 8829. taxea

[Davc]

The counties in my state will allocate the real estate tax. Why not use the same percentage on the mortgage interest?

Because in many states agricultural land is taxed at a lower value than residential property. The same % for taxes and interest would be very skewed.

[Larmil]

Because in many states agricultural land is taxed at a lower value than residential property. The same % for taxes and interest would be very skewed.

Exactly, that is why I get the info from the assessors office.

[PapaTony]

Thanks

Thanks for the response.

My biggest concern was that the taxes and interest would put the farm at such a loss it would all but eliminate their earned income for credit purposes, so I didn't want to allocate anything to the farm.

[taxea]

PapaTony...I know you want to do best for your client but you can't pick and choose which rules to follow. Many states not only tax farms as ag land but they restrict the amount of "personal or residental" land that exists on the property. In Hawaii it is 1/2 acre.

In any case, what I am saying is if this is the case in your state you have no choice but to allocated only a portion of the mortgage interest and property tax to the residential area of the farm. taxea