Deducting Home Mortgage Interest and Property Tax for Property that I currently don't live in

[AC_ROD]

Hi,

I recently purchased a residential property in New Jersey which I plan to use as my primary home, however, renovation work needs to happen before I move in and I don't foresee myself moving in before the end of 2022.  I am currently residing in another home in NJ owned by somebody else. My question is:

1) Can I deduct the mortgage interest and property tax that I am paying as itemized deductions in my 2022 Federal or State (NJ) tax returns even though I am not physically living in the property yet?

Thank you

[xmasbaby0]

Yes you can use the mortgage interest and property tax as itemized deductions whether you live in the house yet or not.   You will be able to enter the amounts you paid in 2022 on your 2022 Schedule A.   But....they might not even make a difference, depending on whether you have enough itemized deductions to exceed your standard deduction.

HOMEOWNERSHIP DEDUCTIONS

It is very hard for a lot of people to use itemized deductions now that the standard deduction is so much higher.  Your home ownership may not have any effect on your tax due or refund, especially if you purchased the house late in the year.  

Standard Deduction
Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach.  The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes. 

2022 STANDARD DEDUCTION AMOUNTS

SINGLE $12,950  (65 or older + $1750)

MARRIED FILING SEPARATELY $12,950  (65 or older + $1750)

MARRIED FILING JOINTLY $25,900  (65 or older + $1400 per spouse)

HEAD OF HOUSEHOLD  $19,400  (65 or older +$1750)

Legally Blind + $1750

Home Ownership

There is not a first time home buyers credit on a Federal return. That ended in 2010. If your state has such as credit, you will be able to enter it when you prepare your state return.

Buying a home is not a guarantee of a big refund.  Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you do not even have a full year of home 

ownership deductions.

Your closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees.  There are no deductions for appraisal, inspections, title searches, settlement fees. etc.

Your down payment is not deductible.

Your homeowners insurance for fire, hazard, flood, etc. is not deductible for your own home.

Home improvements, repairs, maintenance, etc. for your own home are not deductible.  

Homeowners Association  (HOA) fees for your own home are not deductible.

Go to Federal> Deductions and Credits> Your Home to enter mortgage interest, property taxes, private mortgage insurance (PMI) and loan origination fees (“points”) that you paid in 2022.  You should have a 1098 from your mortgage lender that shows this information.  Lenders send these in January/early February.

[Opus 17]

You may deduct all the property taxes you pay in the US for real property owned for personal purposes (taxes on business property goes on the business side of the tax return).   However, the property tax itemized deduction may be limited by the overall $10,000 cap on deducting state and local taxes.

You may deduct mortgage interest on your main home and one second home.  You aren't currently paying deductible interest on your main home, but this house can count as your second home. 

[rjs]

As the others have said, you can deduct the mortgage interest and property tax on your federal tax return, subject to the normal limitations on itemized deductions.

New Jersey does not have itemized deductions like the federal tax return. On the New Jersey tax return there is no deduction for mortgage interest. There is a property tax deduction or credit, but it's only for your primary home, so you would not be eligible for it for 2022 if you never live in the home in 2022.

It's not clear what the status of your current home is. If you are a tenant renting the home from the owner, you may be eligible for a property tax deduction or credit on your New Jersey tax return based on a portion of your rent.