@nailtech123 , now that you have clarified the situation, I understand the issue to be :
(a) The property ( 100 acres of Ag land and a house that sits on it ) has been acquired and a mortgage has been taken on this i.e. against the whole property.
(b) there is business income from the property and the house is residential--primary residence of the owners
(c) the issue of allocation of the mortgage interest and the property tax between Schedule-A ( itemized deduction ) and Schedule-F ( Farm income ) is while the mortgage interest and prop. taxes are for the whole prop, Schedule-A deductions for both the interest and prop taxes are limited ( by outstanding mortgage and SALT) while these are not limited in case of Schedule-F. Thus the tension on how to do it.
(d) as @Critter-3 has correctly pointed out that there needs to be allocation of these items between Schedule-A and Schedule-F. As a practical matter , I suspect it is more complicated by ( possible) fact that often in such housing, the living quarters are pretty small, and farm business related material/ machinery are stored within the roof line of the residence -- barn/garage / from yard / back yard. At least this is true of the farms that I have seen in MI. Even if one gets the assessment details from the local tax administration/ city, the improvement value will definitely include all physical structures whether used for residential or farm/ business purposes.
(e) Hence my suggestion for this allocation would be (a) get the tax assessors allocation of value between total land { $L } and total improvements { $I} ; (b) measure actual dedicated SQ. Ft of residential portion of improvement "R" and total improvement Sq. Ft "TI"; (c) create a ratio of R to TI. (d ) now use this R/TI ratio to allocate property tax to the residence and a similar ratio for mortgage insurance. Also don't forget to use the improvement to total valuation to allocate the "outstanding mortgage " balance for purposes of Schedule-A mortgage interest deduction eligibility.
Does this make sense ?
Please remember to record all this for the first time and from then on follow this same basis for future. IRS may come back to understand the allocation procedure. Obviously from tax collection perspective ( even though not intended in the law ) it would be best to allocate all mortgage interest and tax to the residence and thus disallow most of it while from the tax payer perspective lumping all the mortgage interest and the property taxes onto the FARM business ( schedule-F ) would be desirable.
Is there more I can do for you ?
stay safe
pk
