Discussion:Choice in where to deduct interest/taxes?
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Discussion Forum Index --> Tax Questions --> Choice in where to deduct interest/taxes?
Sierrafc.com (talk|edits) said: | 18 September 2008 |
| If you are the owner of rental real estate, do you have a choice to either deduct mortgage interest on Schedule E or Schedule A to get the most favorable outcome? How about the same question for property taxes?
Thanks! | |
Death&Taxes (talk|edits) said: | 18 September 2008 |
| No.
........................ I'm waiting for the inevitable, 'can you give me a cite?' Basic reason is that it does not meet the definition of qualifed interest paid on a residence or second residence. | |
ReadMyLips (talk|edits) said: | 18 September 2008 |
| Also, the interest tracing rules of sec 163 | |
Sierrafc.com (talk|edits) said: | 18 September 2008 |
| How about the property taxes? | |
Sierrafc.com (talk|edits) said: | 18 September 2008 |
| Actually, I just found in Pub 936 that you can elect as second home as long as you live there more than 14 days, which then gives you the ability to deduct the interest on Schedule A as a qualified home. | |
| 18 September 2008 | |
| gosh, Sierra, those are facts not in the original post. | |
Death&Taxes (talk|edits) said: | 18 September 2008 |
| And if you rent it and your personal use is more than 14 days, or 10% of the number of days rented, whichever of these is greater, you must allocate all expenses between personal and rental. | |
Sierrafc.com (talk|edits) said: | 18 September 2008 |
| One more point...my wife and I each own properties (the one referenced above for rent is my property). If we file separately, I believe then she would be able to claim her property as a second home and I would be able to claim mine as second home and allocate expenses based on the rental days / personal days. Am I misunderstanding anything with regard to filing separately?
And by the way - I realize I didn't include all the facts in my first post and I appreciate all feedback. Thanks! | |
| 18 September 2008 | |
| D&T
Here's a possible cite that you can use. All rentals are passive. Here's a snip from FSA 3501. See if it's what you were looking for. [start]As to deductions in general, the Report states the following: Interaction with other Code sections.-It is clarified that the passive loss rule applies to all deductions that are from passive activities, including deductions allowed under sections 162,163,164,and 165. For example, deductions for State and local property taxes incurred with respect to passive activities are subject to limitation under the passive loss rule whether such deductions are claimed above-the-line or as itemized deductions under section 164. [end] The "report" referred to in the snip is the Conference Committee Report to P.L. 99-514 (AKA the Tax Reform Act of 1986) | |
| 18 September 2008 | |
| You probably don't save anything by filing separately. It can cost you more in taxes.
Do you use the houses as vacation homes for real??? Can you prove your time there? It sound like you are trying to skirt the sched e. | |
| 18 September 2008 | |
| You can't deduct interest on schedule A for a "third" residence by filing separately. See Sec. 163(h)(4)(A)(ii). | |
Death&Taxes (talk|edits) said: | 18 September 2008 |
| Thank you, NYEA. My first thought was a joke but then I thought I'd add to it. | |
Sierrafc.com (talk|edits) said: | 18 September 2008 |
| Thanks for all of the feedback. So here is the conclusion I have derived:
1) The home we are living in is a rental and is our primary residence. We get no deductions related to this. 2) Our second residence (which my wife's mother actually lives in) qualifies and we can deduct the related itemized deductions. 3) My home, which was our primary residence until 9/1 and have rented since then, qualifies for allocating the expenses between schedule A and E based on the number of days rented / personal use. 4) We should file a joint return because there is no benefit to filing separately (at least as far as it applies to this discussion). Any other concluding remarks you can provide are appreciated...i.e. if you agree with my conclusion. Thanks so much! | |
