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from CPA journal

http://archives.cpajournal.com/2000/0400/Departments/d45500a.htm#:~:text=Passive%20interest%20expens... 

Passive interest expense is deductible on Schedule E after applying the passive loss limitation rules of IRC section 469. Form 8582, Passive Activity Loss Limitations, and its supporting worksheets are generally used to determine the deductibility of passive activity losses.

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Passive activity
Interest incurred for an investment in a "passive activity" generally doesn't qualify for the investment interest deduction. A passive activity is a business or trade in which you hold an ownership interest but in which you don't actually participate.

For example, say you borrowed $20,000 to buy a 10 percent stake in a friend's car wash. That stake is certainly an investment, but unless you were there washing cars (or doing some other work), it's a passive activity, because you're not materially involved running the business. Thus, you couldn't deduct the interest on the $20,000 loan as investment interest. However, you could use the interest to offset income you received from the passive activity.

Also, under the tax code, rental activity generally counts as passive activity, so if you borrowed money to buy a house to rent out, the interest isn't deductible as investment interest. But in this case, you could use the interest as an expense item for operation of the rental property on Schedule E.