Discussion:Mortgage Interest Limits - Schedule E
From TaxAlmanac
| Revision as of 20:13, 1 June 2009 RoyDaleOne (Talk | contribs) (Reg. Sec. 1.163-) ← Previous diff |
Current revision LSC CPA (Talk | contribs) (Thanks!) |
||
| Line 48: | Line 48: | ||
| 6 months limited, 6 months fully deductible appears to be the correct answer. | 6 months limited, 6 months fully deductible appears to be the correct answer. | ||
| }} | }} | ||
| + | |||
| + | {{ForumReplyPost|UserID=LSC CPA|Date=1 June 2009|Text=Thanks!}} | ||
Current revision
Discussion Forum Index --> Advanced Tax Questions --> Mortgage Interest Limits - Schedule E
Discussion Forum Index --> Tax Questions --> Mortgage Interest Limits - Schedule E
| February 11, 2008 | |
| Reviewed Pubs 527 and 535 but after reading many of the prior posts, I still need clarification as to the mortgage interest limitations. Taxpayer has $520,000 in mortgage debt on primary home ($400,000 1st mortgage and $120,000 equity loan).
1. Should be no issues here with Schedule A's $1 million limit. Taxpayer also has second property (FMV $1 million) with $760,000 1st mortgage lien. Taxpayer doesn't meet 14 days or 10% occupancy rule so property can actually be considered 100% investment property. Rental reported as Schedule E prop. 2. Can taxpayer deduct the entire $48,000 interest on investment property loan on Sch E? 3. Would some of the $760,000 rental/ invest property loan factor into the $1 million, $100,000 equity loan limits should taxpayer decide to live in house more than 14 days? 4. (I would hope that Intuit's ProSeries will identify excess interest as an error or non-deductible based on data entries to the Worksheets, Sch A and Schedule E). For response purposes, please ignore any AMT considerations, 1987 grandfathering exceptions, and the $150,000 AGI limitations for rental loss reportings. Thanks. | |
Ken@seamann.com (talk|edits) said: | 12 February 2008 |
| $1,000,000 limit is for Primary & 2nd home purposes only (TOTAL FOR BOTH), does not apply to rental property. | |
| February 12, 2008 | |
| Thanks. So entire $48,000 can be reported on Sch E Rental? If taxpayer decides to use the house for 14 days/10%, then limitation applies as 2nd home? | |
Death&Taxes (talk|edits) said: | 12 February 2008 |
| 1. His equity loan on his principal residence is limited to 100,000, since you note that it is not Home Acquistion debt but an equity loan, and that 100,000 can be questioned if at the time of the loan, it exceeded the FMV of the property.
2. Correct about the interest on the Sch E property unless, again, the 760,000 was a refinance where he took out the equity. 3. If he moves into the rental, he has 760K of acquisition debt, assuming he did not grab the equity eariler. 4. If he rents his current residence, the 520,000 interest would be on Sch E. The interest on the equity loan would depend how he used the proceeds. 5. Proseries will leave you on your own to do all this....they may mention something in the diagnostics, but I had to amend returns two or three years ago because I did not realize my client's mortgage was at 3.25% and it exceeded 1.1 Million. good luck | |
| 12 February 2008 | |
| Hold on a sec D$T. I think that the equity loan might have been a second taken out to purchase the home. If not, the not only do we have to worry about the FMV at the time of the loan but also he is 20k over the 100k limit. | |
Death&Taxes (talk|edits) said: | 12 February 2008 |
| That is what I said, he is limited to the interest on 100K, or as noted the FMV of the property when it was taken out. With the state of the lending industry, I doubt you will see much of that anymore. | |
| 1 June 2009 | |
| I have a client with a second home and he started renting it out in July of 2008. The first 6 months they used it personally. Their mortgages are over the $1,000,000 limit, including the mortgage for this property. Because the second home converted to a rental the second half of the year, I am wondering how to go about computing deductible mortgage interest, because once this property converted to a rental, the loan balance for the first home fell below the $1,000,000 threshhold. For the remaining 6 months of the year, then, all the interest could be deductible without the limitation. Do I consider the first 6 months' interest limited, and the remaining 6 months interest fully deductible? Has anyone else run into this situation? | |
RoyDaleOne (talk|edits) said: | 1 June 2009 |
| Reg. Sec. 1.163-8T ----
(i) ALLOCATION OF DEBT. Debt is allocated to an expenditure for the period beginning on the date the proceeds of the debt are
used or treated as used under the rules of this section to make
the expenditure and ending on the earlier of--
(A) The date the debt is repaid; or
(B) The date the debt is reallocated in accordance with the
rules in paragraphs (c)(4) and (j) of this section.
6 months limited, 6 months fully deductible appears to be the correct answer. | |
