Yes, you can generally claim the mortgage interest deduction on a second home where your parents live rent-free as long as it meets the following requirements:
Key Points:
Mortgage Interest Deduction:
- You can deduct the mortgage interest on a second home as long as the mortgage is secured by the home and you itemize your deductions on Schedule A of your tax return
- You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.
- If you rent out your second home for 14 days or fewer during the year, the rental income is tax-free, and you can still deduct mortgage interest and property taxes according to the rules for a second home
- You can also deduct property taxes on your second home. However, the total deduction for state and local taxes (SALT), which includes property taxes, is capped at $10,000 per year
Steps to Enter a Second Home in TurboTax:
- Open your return in TurboTax.
- Go to the magnifying glass and search for "Form 1098" and press enter.
- Click on the jump link for "Form 1098".
- Answer "Yes" to "Did you pay any home loans in 2024?".
- On the "Let's get your 1098 form" screen, enter the name of your lender to see if you can import your 1098.
- If you can't or don't want to import, select "Change how I enter my form" to upload, take a picture of, or manually enter your 1098.
- Continue through the screens and answer questions
- When you get to the screen labeled "What kind of property is this loan for," click "Second home"
- Continue through the screens until your 1098 is added
Note: If your parents paid rent, it becomes a rental property and would need to be claimed on Schedule E. You could then claim expenses, including mortgage interest. See here to enter a Schedule E if applicable.
Supporting Links:
