mortgage interest deduction two homes one is now a rental

Forum|Forum|6 years ago
March 27, 2020
1 reply
28 views

Hi,

A taxpayer has a home secured by a mortgage with a principal balance of $400,000 and a HELOC with a balance of $100,000 both loans originated in 2016 before TCJA. He purchased a new home in 2019 with a new $600,000 loan. He lives in the new house and started renting out the first house in 2019. Since the first house is now a rental property reported on schedule E, can he deduct all of the interest on the new loan interest on schedule A and all of the previous loans on schedule E? - or is he limited by $750,000 cap and can only deduct interest on the first $250,000 of the $600,000 loan?

Thank you for your help

Lacerte Tax

This topic has been closed for replies.

Best answer by TaxGuyBill

@LSTAX wrote:
can he deduct all of the interest on the new loan interest on schedule A

Yes. Mortgages on rental property do not count towards the limit.

@LSTAX wrote:
and all of the previous loans on schedule E?

Only if all of the loan was used for the property. If any of the loan (such as the HELOC) was used for personal items, that portion would not be deductible.

T

TaxGuyBillAnswer

Level 15

@LSTAX wrote:
can he deduct all of the interest on the new loan interest on schedule A

Yes. Mortgages on rental property do not count towards the limit.

@LSTAX wrote:
and all of the previous loans on schedule E?

Only if all of the loan was used for the property. If any of the loan (such as the HELOC) was used for personal items, that portion would not be deductible.

L

LSTAXAuthor

Level 5

Thank you!

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