One of the instructors of the EA class I attended last weekend said that the IRS prohibits the mortgage interest deduction on form 8829 unless the house/home office is depreciated. Is that corret for I have seen new clients over the years in which a CPA deducted mortgage interest but did not depreciate the house.
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I believe it's the other way around. You can't take the depreciation deduction without first taking the mortgage interest deduction - just like the vacation home rules.
The key issue is that deductions on 8829 are limited to income. There are some items that are deductible regardless - mortgage interest, real estate taxes, and casualty losses. If the taxpayer chose to put those items entirely on Schedule A, then they'd be able to take additional deductions for depreciation, etc. on the 8829, up to the amount of income. So no fair playing games like that.
The form is designed this way. The Sch. A items go first, then the direct expenses, then the depreciation. For each group, the remaining limit is calculated. If you leave out any of the Sch. A items from the 8829, you'd better not show them on the Sch. A.
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