Can I claim mortgage interest deduction on a second home which my parents reside in with zero rental?

[SabrinaD2]

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:

1. Open your return in TurboTax.
2. Go to the magnifying glass and search for "Form 1098" and press enter.
3. Click on the jump link for "Form 1098".
4. Answer "Yes" to "Did you pay any home loans in 2024?".
5. 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.
6. Continue through the screens and answer questions
7. When you get to the screen labeled "What kind of property is this loan for," click "Second home"
8. 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:

• Buying a Second Home—Tax Tips for Homeowners
• What Tax Deductions Can I Claim on a Second Home?

[daxbucciero]

I have the same situation. We purchased a home solely for my parents to live in rent free. We’ve never reported this property on our income taxes.  Can I deduct mortgage interest, closing cost, utilities, HOA dues, property, taxes, and insurance, when coming up with the net gain?

[KeshaH]

If the home is treated as a second home, you can deduct mortgage interest assuming your loan amounts are within the limits. You can also deduct your real estate taxes. However, since it's not a rental you can't deduct any of the other expenses.