If she has a loss on the rental and if she is up for it, she could move into the second home for at least 10% of the days it is held out for rent and then it qualifies as a second home and she can deduct the home equity interest on schedule A.
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Why do that when you could just rent it out and record everything on sch E to take the rental loss? That would have to be a much better deal.
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Lets go through each point slowly:
It was identified as a rental from time of purchase, not a second home. By a poster who does not "know why" someone would secure a rental with a primary residence. Do you really think it is beyond the realm of possibility that the client does not want to consider all alternatives available? Critical thinking is an important tool to employ in these situations. You do know that the purpose of the second mortgage can only be decided by the client? Do not make decisions for them.
Turning the property into a personal use rental would eliminate many rental deductions. Such as? If you recall I offered this as an option in case the rental is losing money. Maybe just maybe the client would like to take some of interest off of schedule A as opposed to directing it all to Schedule E. Again, it will require her to be flexible with her living situation, but then again, that is what I said originally.
No one can deduct home equity interest on Schedule A. This is just plain wrong. Do you work with for the same firm that employs the poster who was confounded by the standard deduction?
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If the loan for the rental increased the total outstanding loans for both properties to more than $750k then you would want to make the election. Just to be clear though, the client did not use the loan to purchase a rental. They used it to buy a second home they decided to rent out.Last edited by Dude; 02-13-2019, 11:14 PM.Leave a comment:
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I agree with using the resident home mortgage interest deduction for Investment property (Schedule E),
However, do you not have to make a election to treat the mortgage interest as not secured by the home.[ Reg.ยง 1.163-10T(o)(5)]. in order to take the deduction?Last edited by Gene V; 02-14-2019, 12:14 AM.Leave a comment:
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If she has a loss on the rental and if she is up for it, she could move into the second home for at least 10% of the days it is held out for rent and then it qualifies as a second home and she can deduct the home equity interest on schedule A. A lot of ifs, like loan totals being under $750k but her choice of financing gives her options .https://www.irs.gov/publications/p93...link1000229904Leave a comment:
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Yes, it is fully deductible on Schedule E.
For business and rental interest, the loans can be from any source and do not require the business or rental property to be secured by the loan.Leave a comment:
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Mortgage Interest On Rental Property
Customer had a personal residence with no mortgage owed.
She still lives there.
In 2017 she bought a small rental property, financed per re-fi of her personal residence.
So the loan is apparently secured by her personal residence.
But the loan proceeds were used 100% for the purchase of the rental property.
Don't know why she did it this way.
Can this mortgage interest be used on her rental schedule "E" ?
Thanks for comments
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