Interest Deduction - First Home But Not Living In It
Hey BP community,
I am in a scenario as a first time home buyer in which I am going to purchase a fourplex in NJ most likely with conventional financing (I have been pre qualified). I was originally planning on house hacking and living in one unit and renting out the rest but I had a late night thought the other day. I am able to live with a family member that is close to the fourplex for an extended period of time and increase my cashflow on the fourplex. If I do this how does it affect my ability to deduct mortgage interest at the end of the year?
From my google searching I have came up with the following:
- If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this second home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. If you do not use the home long enough, it is considered rental property and not a second home.
- I would need to live in the house for 10% of 365 of 37 days
Most of what I could find only pertains to having a second home. Any help is greatly appreciated, thanks !
Mortgage interest is a deductible expense for an investment property. No need to treat it as a primary or secondary residence. Its neither.
Nicholas,
This is not a second home of yours. You can deduct all the interest paid for mortgage under schedule E of Form 1040 tax return form. Rental income and expense go to Schedule E and tax payer can deduct all interest paid for the rental property mortgage. You don't have to live there to deduct mortgage interest. Please talk to your tax accountant to plan out the strategy on deductions you can take on your rental property.
I hope I have answered your question.
