If you are not renting out the extra house, treat it as a "second home" for IRS purposes. Mortgage interest and real estate taxes will be deductible. Here's the IRS citation:
Question:
Is the mortgage interest and property tax on a second residence deductible?
Answer:
The mortgage interest on a second home, which you do not rent out
during the taxable year, is generally deductible if the interest
satisfies the same requirements as interest deductible on a primary
residence. If you rent out the residence, you must use it for more than
14 days or more than 10% of the number of days you rent it out,
whichever is longer.
- The combined limitation for mortgage interest on
your primary and secondary residence for a married couple filing a
joint return, or an unmarried taxpayer is $1,000,000 for acquisition
indebtedness and $100,000 for home equity indebtedness.
- Real estate taxes paid on your primary and second residence are generally deductible.
- Deductible real estate taxes include any state, local, or foreign
taxes based on the value of the real property levied for the general
public welfare.
- Deductible real estate taxes do not include taxes charged for local
benefits and improvements that increase the value of the property, such
as assessments for sidewalks, water mains, sewer lines, parking lots,
and similar improvements.
- An itemized charge for services to specific
property or people is not a tax, even if the charge is paid to the
taxing authority. You cannot deduct the charge as a real estate tax if
it is a unit fee for the delivery of a service (such as a $5 fee charged
for every 1,000 gallons of water you use), a periodic charge for a
residential service (such as a $20 per month or $240 annual fee charged
for trash collection), or a flat fee charged for a single service
provided by your local government (such as a $30 charge for mowing your
lawn because it had grown higher than permitted under a local
ordinance).
Can't copy the IRS link - it's too long! Just Google "
Is the mortgage interest and property tax on a second residence deductible?
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