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In order to adjust for mortgage interest, you would need to file amended returns for the last three years and claim the mortgage interest on those returns.
Any other year, the deduction would not be a benefit to you - if you didn't take the deduction, you would lose it.
The only time that mortgage interest is added to basis is when the property is not being held for rent. If the building is being rented or is advertised as rented then you would have to deduct the cost as a current rental expense.
Do you have any further questions about this regard?
I just noticed how you said that the house was never a rental unit. If that is the case, then you will add the cost of the real estate taxes into the basis. Then, you will deduct that from the sales price to arrive at the taxable amount
Megan, The property was never rented (construction took 2006-2011) and I sold it within a few months of construction completion. My question was on interest on the mortgage that I never deducted. Can I add this to cost basis
Yes, you can add that to the cost basis
The property was never rented. So just to reconfirm. I can add mortgage interest which was never deducted earlier to cost basis
That is correct, because it is just an investment property and not a rental.
Do you know tax preparer who is well aware of the above and can help me prepare the taxes (I live in Cupertino, near San Francisco)