Question about Mortgage interest deductions and property tax deductions on Schedule A

[ned415]

Hi, I have an investment real estate property that was not rented out during the tax year, and it is also not my residence either. However, I do have a mortgage for this property, would i be able to deduct the mortgage interest expense on schedule A. What if the property is rented out, would I still be able to deduct the interest expense on Schedule A as well?

If the investment property is not being rented out (therefore I am not operating it, no passive income), would I be able to deduct my property taxes on schedule A as well? Thanks

[DavidD66]

You can deduct the property taxes as an itemized deduction on Schedule A (subject to the $10,000 limit for state and local taxes) if your property is not "in service".  You cannot deduct the mortgage interest on Schedule A whether the property is rented or not.  The mortgage interest deduction is limited to your primary residence and a second home.  It does not include mortgage interest on investment or rental properties.  

[ned415]

Thank you very much! this is very helpful. If i cannot deduct mortgage interest on investment/rental properties on Schedule A, is there another way for me to deduct these interest payments? Would I be able to deduct these as investment expenses? Thanks

[RobertB4444]

If your rental property is not a rental property then it is a second home.  If your rental property is actively TRYING to be rented (you have ads and realtors out there looking for tenants) then it is a rental property.  If your rental property is actively rented then it's a rental property.

You can deduct expenses for a rental property on schedule E with the rental property information.  You can deduct expenses for a second home on schedule A.

If this is a rental property that maybe you just took off the market for a year because you needed a breather and you're going to put it back on the market next year then this falls into a limbo where the only deduction you get is the property taxes.  It's an investment property on a short break from earning.  If you have converted it to personal use and you'll convert it back to a rental property someday when you no longer need it for personal use then it's a second home.

@ned415