theresa d

[theresa d]

does interest reported as mortgage interest applicable to vacant land (not attached to taxpayer's house) count for second home mortgage interest deduction? thought of deducting as investment interest however 1098 indicates this is mortgage interest which would not qualify for investment interest. checked with client and this is not home equity debt on main house. land was purchased as an investment. thanks in advance

[Bees Knees]

TTB, page 4-11, "A home mortgage is any loan that is secured by the taxpayer's main or second home as collateral for the loan....a loan secured by the taxpayer's third home is considered a personal loan, unless the third home is used exclusively for business or investment purposes....A home is defined as any house, condominium, cooperative, mobile home, boat, or similar property with basic living accommodations including sleeping, toilet, and cooking facilities."

Unless you stick something on the vacant land with sleeping, toilet, and cooking facilities, the interest on the vacant land is not deductible as home mortgage interest.

[theresa d]

how is this deductible?

can taxpayer deduct the interest on vacant land secured by a mortgage as investment interest? i would think so however investment interest does not include home mortgage interest. client received a 1098 mortgage interest statement . i quess i'm so conditioned to mortgage interest representing home mortgage interest. in this case mortgage interest is secured by vacant land and deductible as investment interest?

[Bees Knees]

The 1098 does not mean anything. The bank can't give you tax advise.

If the loan proceeds were used to purchase vacant land, and the vacant land is held for investment purposes (not used for personal reasons such as camping etc.), then the interest expense is deductible as investment interest, subject to the investment income limitation rules.

[theresa d]

thanks

for the imput