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» From: Southport, CT Dear TaxMama: Can I deduct mortgage interest on a rental property, which I use less than 14 days? I'm already maxed out on qualified home mortgage interest, am fully at risk and hold this for investment, which is my business. Schedule C, line 16, or schedule E, line 12? Thanks Jon Hi Jon, You should be able to deduct the interest on Schedule E, which has all the limitations of rental income and passive losses. You seem to understand what that's all about. But, if you're already maxed out on mortgage interest, odds are that your adjusted gross income is higher than $125,000 and you can't use the passive losses. So, you want to deduct the interest on Schedule C? Darlin' don't come to me for dispensation. It won't come from me. Sit down with a good local tax pro who understands the difference between passive investment rules, real estate and property management issues. There may a way around all this, but they'd need much more in depth information than you can provide in this quickie forum. Incidentally, I will give you one VERY valuable tip it's really worth a fortune if you pursue this advice. It can remove your real estate activity from the passive loss rules and turn it into a Schedule C business. Convert your rental property to hotel/business property. Provide other services, like maid service, concierge service (pick up dry cleaning, groceries, run certain errands) etc. You've just sidestepped the passive loss rules. But it MUST be legitimate and you may have to register with your city or state under their hospitality rules and collect/pay hospitality taxes. Best wishes, Eva Rosenberg Your TaxMama  |
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