Discussion:Mortgage Intererst on Rental Used as Dwelling. HELP!
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Discussion Forum Index --> Advanced Tax Questions --> Mortgage Intererst on Rental Used as Dwelling. HELP!
Discussion Forum Index --> Tax Questions --> Mortgage Intererst on Rental Used as Dwelling. HELP!
| 11 May 2008 | |
| I'm currently renting, and about to purchase a weekend home that I will also rent out for more than 2 weeks.
That is to say I will be living in it for more than 2 weeks, and also renting it out for more than 2 weeks. I have read the 527 over and over, and am just so confused whether I can file a Schedule A as well as a Schedule E for the mortgage interest expense. Let's say I stay in the house 30% of the days and rent it out 70% of the days. If my rental income for this year is less than the 70% of the expenses (mortgage, tax + maintenance), then do I really disqualify myself from filing mortgage interest deduction on Schedule A and can only file the expenses up to 70%? I was hoping that I could deduct 30% of mortgage interest on Schedule A as well as the 70% of expense up to the rental income. HELP! I'm supposed to sign the contract this week! | |
| 12 May 2008 | |
| It seems you really need to sit down with a tax professional to discuss Rental Property tax ramifications.
There are a number of tax issues relative to vacation home rentals that you may not be aware of - that a tax professional can bring to your attention. | |
| 12 May 2008 | |
| Call your tax advisor in the morning and ask him to explain why you cannot deduct 100% of the interest on Schedule A. | |
| 12 May 2008 | |
| Generally you will be able to deduct the mortgage interest on the weeekend home in total. Some will be allocated to the Sch E, the rest will be deducted on Sch A. The allocation will be based on a proportion of rental days to total days, there are several formulas that are permissible. Any rental expenses that are otherwise not deductible will not be allowed but will carry forward to future years. Any loss caused by property taxes and mortgage interest will be allowed since they would be deductible anyways. | |
| May 12, 2008 | |
| Junderwo, this is a complicated area that I've seen professionals do incorrectly on a regular basis. Get professional help, it's deductible!
As DaveCPA says, there are several permissible formulas; each has pro's and con's. | |
