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doug5
New Member

My 2nd home is also a rental. can deduct the mortgage interest twice? 1st as a 2nd home and 2nd as a rental expense?

 
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4 Replies
Carl
Level 15

My 2nd home is also a rental. can deduct the mortgage interest twice? 1st as a 2nd home and 2nd as a rental expense?

can deduct the mortgage interest twice?

Of course not. If you converted the property from personal use to rental in 2019, then mortgage interest and property taxes is prorated on the SCH E for the period of time it was classified as a rental. The remainder is a SCH A itemized deduction.

The property insurance also has to be prorated on the SCH E for the period of time it was a rental. For the period of time it was personal use, the remainder of the property insurance is *not* deductible anywhere on your tax return.

If you elect to have the program do the splits for you, it will do so with the mortgage interest with no problem. But not for the property taxes or insurance. You'll have to figure those manually.

Carl
Level 15

My 2nd home is also a rental. can deduct the mortgage interest twice? 1st as a 2nd home and 2nd as a rental expense?

Assuming you coverted the property to a rental in 2019, the below information provides you the clarity you need, which the program does not provide.

Perfection in your first year is not an option. It's a must. Even the tiniest of mistakes in that first year will grow exponentially as the years pass. Then when you catch your boo-boo years down the road, the cost of fixing it will be $expensive$. So if you have questions, by all means please ask. Otherwise, you can "guess" at your own financial risk and potential peril in the future.

Rental Property Dates & Numbers That Matter.

Date of Conversion - If this was your primary residence before, then this date is the day AFTER you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.

RENTAL PROPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED

Property Improvement.

Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.

To be classified as a property improvement, two criteria must be met:

1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.

2) The improvement must add "real" value to the property. In other words, when  the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.

Cleaning & Maintenance

Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.

Repair

Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.

Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.

However, when you do something like convert the garage into a 3rd bedroom for example, making a  2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.

pandora541
Returning Member

My 2nd home is also a rental. can deduct the mortgage interest twice? 1st as a 2nd home and 2nd as a rental expense?

I rented out my vacation home for a few months this year and am trying to prorate the mortgage interest and property taxes. The property taxes is automatically split by turbotax but I'm having trouble entering in the correct prorated amount for the mortgage interest on the Schedule A (proration worked for Schedule E ). Any guidance on how to fix this? The mortgage interest on the schedule A either comes out to the full amount+prorated amount when I upload the 1098 info (so way over) , or is 0 if I remove the 1098 info. I can't seem to get it to show the prorated amount. Do I have to enter it in manually somewhere?

DawnC
Expert Alumni

My 2nd home is also a rental. can deduct the mortgage interest twice? 1st as a 2nd home and 2nd as a rental expense?

How did you upload the 1098?   If you imported it, it all went to Schedule A and you would need to adjust it.    Can you remove it and try to enter it like you did the real estate tax since that did pro-rate correctly?   @pandora541

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