@u0d4n7a0p
Some comments related to your question(s):
- The specific language of Treasury Regulation 1.163-8T states "In general, interest expense on a debt is allocated in the same manner as the debt to which such interest expense related is allocated......"
- True this is a temporary regulation and has been around for quite awhile, this is still the IRS' position on this matter and has not had any significant Court push back.
- While all of your debt is related to just a single purchase, based on the underlying premise of the regulation, I believe you should be following your 75/25 ratio. This is because these rules are "interest tracing rules", and tracing this interest based on your facts, I believe you arrive at the 75/25.
- Anything outside of this allocation would most likely require you filing form 8275-R. Filing this form with your tax return is probably a certainty for an audit along with justification as to why your allocation is superior to that in the regulation.
- TT most likely does not accommodate this allocation and it will need to be entered manually in the appropriate section of the program.
- This doesn't mean that you are stuck with this allocation forever. If your facts change, then the allocation can change as well. So if at some point this no longer has any rental, then you can allocate 100% to the primary residence.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
