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Level 1

Mortgage Interest

My wife and I own our primary residence that we still have a mortgage on. Several years ago, we bought a condo in a different city where my wife works.  We have a mortgage on that and I consider that our second home.  Last year I bought a hose in Texas for my son and family to live in.  I also have a mortgage on that.

 

My first question is:  Can I declare the mortgage interest on this "third" home?

 

Part of the reason for buying this home was to help my son get out of financial difficulty.  The monthly mortgage payment is $1900.  My son currently pays me "rent" of $500 per month.

 

My second question is: Since my son is paying some rent, would I consider this an investment property rather than a third home?

 

Thank you.

 

 

1 Reply
Level 20

Mortgage Interest

Personally, I would recommend that you seek professional tax/legal guidance with respect to this transaction. There could be certain gift tax (return filing) issues involved and a professional may be able to provide you with more beneficial options for structuring this arrangement with your son.

 

 


@keatja1 wrote:

My first question is:  Can I declare the mortgage interest on this "third" home?


You cannot deduct the mortgage interest on a third home; it would not be considered a "qualified home" by the IRS for that purpose.

 

See https://www.irs.gov/publications/p936#en_US_2018_publink1000229900

 

 


@keatja1 wrote:

My second question is: Since my son is paying some rent, would I consider this an investment property rather than a third home?


You would not able to consider the home as a rental property (report the income and deduct the mortgage interest paid) since your son is (almost certainly) paying less than fair rental value. As a result, the home is considered to be used by you for personal purposes (per Section 280A).