Second Home

[S T]

In order to deduct mortgage interest for 2nd home, does the 2nd home mortgage have to be secured by the 2nd home, in otherwords a separate mortgage.

Or can the primary home be secured for the mortgage for both the primary and 2nd home and be treated as acquistion debt.

Sandy

[DTS]

Sandy

Can you explain this situation with a little more detail, at least for me to understand? How was the purchase of the second home completed? I may be way off-base, but it seems this is OK as the "use" is the same and as long as your t/p is within the $$ amounts??

Sandy, I'm sorry I am not any help to you at this point. I am hoping someone in the know will jump in, as I'd like to know, as well.

Dennis

[veritas]

The mortgage secured

against the first home to buy the second home is not aquisition debt. Uo to 100k could be equity debt.

The mortgage must be secured against the property purchased to be aquisition debt.

[S T]

2nd home

T/P refinanced their acquisition debt mortgage on their primary residence and received cash out, which they then in turn purchased a second home, and paid cash.

Cash out $107,000. So I am over the equity debt limit of $100,000 by $7,000

Question is, can the mortgage secured by the primary residence be considered acquisition debt for both the primary and second home and make the refinanced mortgage interest 100% deductible

Or,

will I have to limit mortgage interest to the acqusistion debt of the primary home and use up the $100,000 equity debt making interest on $ 7,000 of debt non deductible.

Sandy

[S T]

Secured

Thanks Veritas,

Your post got there before mine.

So if I understand correctly, primary and second homes, must have their own mortgages and each of the properties must secure their own debt.

So I am at using the $100K equity debt in this case and disallowing interest on $7K.

Sandy

[veritas]

Assuming the home is

used as a second residence and not for business or investment purposes. You are correct the interest is limited to 100k. Thr interest on the 7k is not deductible.

[S T]

What if

This one is a 2nd home on the East Coast.

If it were business or investment property, then could you use the entire $107,000 and assign it to the Schedule E, or Schedule C, etc.

The $100K equity debt then would not be a factor?

I don't know why this is so hard for me to get these rules straight!

Veritas, thanks for your assistance,

Sandy