Deductions & credits

I'm sorry for your loss. Basically, what Hal_Al and Opus_17 are saying, is that for now, since you're not renting it, it's your 2nd home. Your deductions at this point, are the Mortgage Interest that will be reported to you on a 1098 issued by the lender at tax time. Do note that you will only be able to deduct that mortgage interest that you actually paid out of *your* pocket. So most likely, when you enter this specific 1098 into the TurboTax program, you will select the box that says, "The interest amount I entered here is different from what's on my 1098". Then on the next screen you will explain the difference with a statement like "inherited property on (date)" and then press on.

Note that with the 1098, you enter each 1098 separately. So you'll enter the one for your primary residence, click "Add another 1098" and enter the one for your inherited property.

When you are asked for property insurance paid in 2016, you will enter the total of all property insurance that "you actually paid" on your primary residence and the inherited property. Now most likely, the mortgage payments you made will include excrow for property taxes and insurance. (Insurance isn't deductible). So if for example, you started making the payments on Oct 1 of 2016, then it's fair to say that you made 1/4 of the property tax payments on that property.

Note that you will need to pay attention to the date that property taxes were paid from escrow. If they were paid "before" you started making payments, then *you* didn't pay any of the property taxes on that property. But, if they were paid after you made just that 1st payment, then you can prorate the taxes paid for 12 months, and claim the amount for the number of months that you paid.

Most likely, assuming your mother's wealth was not transferred to an estate, you will be doing a final tax return for her. If so, then on her return you will report the pro-rated amount of property taxes paid from escrow with her money.

It's imperative that you get an official appraisal on the property ASAP, by a qualified, certified, licensed property appraiser. I guarantee you that you will need this. Understand that the appraisal done by your county property appraiser is not what I'm talking about either. Your county appraises the "tax" value of the property for the sole purpose of determining the amount of property taxes to be assessed each year. It has nothing to do with the fair market value of the property (the price you can sell it for) and is generally significantly lower than the FMV. SO get the appraisal done by a professional. You can expect such an appraisal to cost you between $300-$400 depending. on your location.

Why do you need an official FMV (Fair Market Value) appraisal?

 - If you sell the property, you will need that amount to determine the amount of taxable gain you make on the sale, or the amount of loss you can deduct on the sale. (Losses are only detuctible on the sale of business property, not the sale of your primary residence or 2nd home)

 - If you convert the property to a rental, you need to know the cost basis for tax depreciation purposes. That appraisal amount will be your cost basis at the time you convert it from personal use, to rental property.

Without the appraisal, if you are audited in the future on your depreciation amounts, or you claimed gains/losses on the sale of the property, you'll find it hard to prove your numbers to the IRS, and YOU WILL LOSE on any disagreement with the IRS on it's value.

Since you have not yet decided if you're going to rent it out, or just outright sell it, I would suggest you treat this property as a 2nd home for tax purposes when filing your 2016 taxes. That way, you've got more avenues to chose from without having to worry about the financial implications, after you get everything settled with your mom's stuff.

Generally, for folks in your situation I always recommend you wait an absolute minimum of six months after the passing of a loved one, before making any major decisions. It's okay to wait longer if necessary too. It's extremely difficult to think rationally during one's time of grieving. So I hope you find my information straightforward and helpful as you work through this.