I took out a HEL from my principle residence to purchase a rental property filed on my Schedule E. I received Form 1098 to report income. I put the interest expense on Schedule E associated with that rental. IRS states that I have to attach a statement to the return: election pursuant to reg section 1.163-10T(0)(5) to treat debt as not secured by a qualified residence.
Turbo tax will now allow me to attach any statement?
If you want to make the election and attach it to your tax return, you will have to file your federal return by mail. TurboTax does not support attachments in e-filed returns.
Once made, this election cannot be withdrawn without express permission of the Commissioner, IRS. This means that if you sell the rental property, you won't be able to claim the mortgage interest as a Schedule A deduction.
The following blog discusses this issue in some detail: http://www.taxprotalk.com/forums/viewtopic.php?f=8&t=3061
Does this still apply to the 2022 returns? Can we attach an election to a return filed by TurboTax?
Yes, you can still make the election for 2022. However, remember that once the election is made, you can not withdraw the election without approval. To claim the election in TurboTax, you must request your return be mailed and attach a statement with the mailed return.