Should I suspend taking property tax deduction when I have a loss

[johnatmh]

We rent out an apartment which is attached to our main home and depreciate 23% of the home. We have always taken 23% of our property tax and mortgage interest as a rental expense and take the other 77% on our Schedule A itemized deductions. This year due to a major remodel / renovation of the apartment we have excess rental expenses and will have carry over losses that will probably give us a loss for another couple years. 

Does it make sense for us to suspend taking the 23% property and mortgage interest as a rental expense so we can take 100% of them in our itemized deductions this year and possibly next year as well until we again have a profit?  Or is this a bad idea for some reason?

[ColeenD3]

No, you can't take a rental expense on your Schedule A. It is either a rental property or it isn't. Since you have determined that it is, all rental expenses are included on Schedule E.

[Carl]

It is not common for residential rental property to show a taxable profit. Your losses just carry forward until you sell the property. In the tax year of sale, all losses can be realized.

[johnatmh]

We actually usually have significant rental income greater than our rental expenses each year (what I mean by "profit"). This is the first year since 2012 we have a loss.

[johnatmh]

Thank you, However we rent out just a portion of our home (23%) and live in the other portion. We take 23% of our Property Tax and Mortgage Interest as Rental Expense and the other 77% on our Schedule A (itemized deductions).  When I posted this question I forgot that our State and Local Tax Schedule A deductions are capped at $10,000 which we exceed so doing what I was thinking would have no benefit for the property tax portion. However I am planning to take 100% of our Mortgage Interest deduction on Schedule A and 0% as a Rental Expense this year because we have an excess loss on our rental portion and it will not help us as a rental expense, but since we do itemize our Schedule A deductions it does help us there.  Hope this makes sense.

[AmeliesUncle]

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@johnatmh wrote:

Thank you, However we rent out just a portion of our home (23%) and live in the other portion. 

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You seem to be changing your story.  Your original post called the rental an "apartment".  Is the rental space a separate unit (separate entrance, separate kitchen)?  Or is it all part of the same living area?

[johnatmh]

I am not changing my story, I'm clarifying. My first post says, "We rent out an apartment which is attached to our main home and depreciate 23% of the home. We have always taken 23% of our property tax and mortgage interest as a rental expense and take the other 77% on our Schedule A itemized deductions..."

It is attached and part of our main home structure as I try to clarify in my follow-up post. "...we rent out just a portion of our home (23%) and live in the other portion."  The portion I'm referring to is a self contained "apartment" which does have its own kitchen, external entrance, but it also has an entrance from our main home. Part of it used to be a downstairs bedroom and bath. We added on additional space onto the side of our house to create a 650 square foot apartment for my father to live in. After he passed away we started renting it and I worked with a CPA to establish the basis and percentage of the total home which constitutes the portion we rent out. (23%).  Hope this is clear now.

[AmeliesUncle · Accepted solution]

Okay, at least for tax purposes your home means you are using it for your personal living situation.  A separate living area attached to the same building that is not used for personal use is not your home.

If that area is not used for your personal living situation, the 23% of interest can not be added to Schedule A because that is not part of your residence.