Client has mortgage interest expense on a mortgage over $750,000. I did the proper allocation ratio but was wondering if the non deductible amount would qualify for Investment Interest Expense subject to it's limitations?
-
This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content. -
not if it was not used on a different investment. Your personal residence is not an investment for tax . -
They own four properties in the US, all different States. They use all the homes at various times but the NY home is primary. The property with the big mortgage is used sparingly. ????Originally posted by MDEA View PostLast edited by BOB W; 02-07-2021, 10:05 AM.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
-
Since the property is personal use, the over-the-limit interest expense is not deductible. One would need solid tracing of how the proceeds from the loan was allocated to business interests. Two properties only.Comment
-
Agree with the first part but not sure when you refer to two properties.Originally posted by Lee Welter View Post
It appears from the message in post #1, there is only a single mortgage which is on the primary residence in NY. Thus, in this situation, the taxpayer could not use two properties since acquisition debt arises only if the mortgage is secured by the residence.Comment
-
NY residence is not the property with jumbo mortgage.Originally posted by BOB W View PostThis post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
-
Doesn't seem to change anything - acquisition debt requires the mortgage be secured by the residence. ยง163(h)(3)(B)(II)Originally posted by BOB W View PostComment
-
What no one else has mentioned yet is that to use any of the home mortgage interest as a deduction other than home mortgage interest, the taxpayer must elect to treat the entire loan as "not secured by the residence" (meaning, only the other allowed deduction if any, but not both at the same time). This is the so-called "10T" election (1.168 reg, as I recall without looking it up).
Personally, I still have a problem understanding what is meant by the "entire loan", especially when it comes to HELOCs, for example, where every time I write a check it could be considered a different loan (in fact, some HELOC mortgages specifically allow for a "fixed rate partition" that is treated as a separate loan). I mean, why can't people just ask the bank to issue a mortgage for, say, $1M under two separate account numbers, one showing $750K principal and the other $250K principal. It's just accounting, or "tracing" in the end, the bank could easily produce two statements that add up to the loan total."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
-
Thanks everyone for your replies... My initial question is more to getting investment interest status on the other properties that are not lived in. Your replies eliminated a home that is the primary residence but what about other properties that could be called "investment properties" ( with a house on it)?This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
-
Not to hijack Bob W's Question but I have a similar situation.
TP owns 5 properties-Primary residence, vacation home, rental (vacation) home, home rented to (grand)mother (but is rented at less than FMV so does not report as rental income) and home that son lives in (not sure if son is paying rent). I think TP maxes mortgage interest on primary residence & vacation home. It also appears as if previous preparer took mortgage interest on mothers home and son's home as investment interest income.
Is this allowed? If not, are there any other options for deducting mortgage interest on homes that (grand)mother and son live in?Comment
-
Happy: They're personal use unless rented at FRV as an arm's length transaction. So, only two homes can be used for mortgage interest. Personal use prevents investment interest treatment, doesn't it? I don't think there's a limit on how many homes for property tax, but the current $ ceiling applies.
Bob: You said ALL the homes have personal use but you also called them "investment properties" (the quote marks are yours). Can you trace one or more loans to houses that do not have personal use? How many loans are there?Comment
Comment