Mortgage Interest on Three Homes

[Jesse]

Client had a primary residence and a vacation home. Job transfer to new location so purchased a third home.

Sold one of the other homes on land contact. Now taxpayer has three mortgage interest payments. Taxpayer is able to take two of the homes on schedule A.

For the home that was sold on land contract the interest on the land contract must be claimed as income. Can the mortgage interest that is paid on this home also be deducted to offset income? Interest income = mortg interest paid.

[Rae]

Yes, on Form 4952 - Investment Interest Expense Deduction.

[Nashville]

Careful

Rae is right, this interest would qualify as "investment" interest on Form 4952.

But remember, if you deduct the interest, you remove the home from favorable LTCG treatment.