I have a mortgage loan, say in the amount of L1. I will buy a house in the middle of the year, with another loan of L2. After moving, I will convert previous home to rental. Question is, how to figure out the deductible interest for this year? My understanding is total deductible interest = interest from L2 + interest from L1 up to date previous home is converted to rental (date house goes into rental market). Plz help confirm. Thanks!
It is a simple proration ... say you pay $12000 in mortgage interest on the home you convert to a rental say 7/1 ... thus the interest is prorated 50/50 ... $6000 goes to the Sch A and $6000 goes to the Sch E. Same thing for the RE taxes and the homeowners insurance and any other common expenses. Follow the program interview carefully in this section and understand that once you moved out and made it a rental you had NO personal use days in the year of the conversion... this is the most common error ... READ the screens carefully and go slow.