Have Tax Questions? Ask a Tax Expert for Answers ASAP
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
If you rent out your home, the mortgage interest that you pay out is subject to passive activity loss rules, because it is a rental property.
The exception to the rule would be if you rented the house out not more than days per year, then you can deduct the interest as an itemized deduction
However, if your house is a rental it must be deducted on schedule E, and will be subject to passive loss limitations.
You can read about this in publication 936, accessible at the following web address: http://www.irs.gov/publications/p936/ar02.html#en_US_2012_publink1000229917
I have read that Publication. But I also read in the Ernst & Young Tax Guide that there is an exception to that general rule. As I stated before, I read where you rent out your home, intending to return to it after a few years, the mortgage interest may not be subject to the PAL rules.
That is not true. It would always be subject to the passive activity loss rules.
while you are renting it out
The you're saying what I read is wrong.
I am saying that all I've ever heard, is that when you rent out a property you can deduct the mortgage interest on schedule E
Which, if you're not a real estate professional, is subject to the passive activity loss rules
Looks like I am going to do some more research.
Do you have a link to that guide? I could take a glance at it
The website is <ey.com/EYTaxGuide> , but it may not give you page by page access. The note is on page 228 under (Tax Saver) at the bottom of the page.
Okay let me take a look. Thanks
Did you purchase access to this?
I purchased the book.
Okay I do not have access to that, because I did not buy it.
But, the way to keep the mortgage interest from appearing under passive activity loss limitations, you would deduct the amount on schedule A instead of schedule E
however, I have never heard that you could deduct the full mortgage interest if you were renting out the unit and intending to return to it.
That's true, but I want to make sure it's "ok" to do that in this instance. It was only rented out 5 months in 2012, and I can deduct the interest when I lived in it on Sch A. I may try to put all the interest on Sch A and see what happens. And I will do some more research. Anyway I can get back to you, if I find any more info?
Yes, you can come right back here and I will assist you with your issue.
Would you please rate my response as "excellent" so that I may receive credit for assisting you today?
We can still continue our discussion, even after you rate.
When I click excellent service and hit SUBMIT, it will cancel out this chat.
You will still be able to return and ask questions as needed
Trust me, I work with customers all the time like this.
Am I doing this right?? Still there?
Did you get my previous message?? Which was - google Ernst & Young 2011 Tax Guide (pdf). Access page 215 and you will see the same Tax Saver message as in the 2013 Guide.
I will be here till about 5:00pm. Will that time line work for you? Or tomorrow?
Still have not had a reply from you. I went on-line to do my own research and found the answer I needed. Sorry, but I feel I wasted $38.00.
That's true. But my situation was different. And yes, you can bypass the PAL rules in the situation in my original question. There are some excellent articles about that on line with the corresponding IRC numbers that relate to it. You might want to investigate that further in case someone else asks a similar question.
Thank you very much for responding and with the link. I had seen similar articles, but yours was the most comprehensive. I may have been a little inpatient with my criticism of your information, but you finally came through with flying colors.