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Angie, Tax Preparer
Category: Tax
Satisfied Customers: 225
Experience:  Bookkeeping, Profit and Loss, Balance SheetsAll types of US Taxes, Tennessee taxes, Personal, business, payroll, sales tax etc.
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I actually have a few questions... I have a Passive

Customer Question

Hello! I actually have a few questions...
I have a Passive Loss I want to take on my taxes. I incurred the Passive Loss after my rental property was damaged in Hurricane Ivan. I was told my husband and I made too much money to take the loss. I was advised to carry the Passive Loss forward each tax year until we sold the property. In 2015 we did sell the property. I now want to take the loss. However, it is a bit more complicated...I only rented my house the first year that the loss was incurred. After that I held it as a 2nd home. So...I am not sure how to categorize the sale of the home. Do I say it was a business asset or do I say I sold a second home?
Second question...I know I can only take an interest deduction on two of my properties. However, can I take an interest deduction on two properties AND a line of credit?
Thanks for your professional insight.
Ally Tirado
Submitted: 6 months ago.
Category: Tax
Expert:  Angie replied 6 months ago.
You won't be able to deduct the passive loss if you treat the home has a second home for the sale.You can only deduct suspended passive-activity losses in 2 situations: Against passive-activity income When you dispose of the passive activity in a fully taxable transaction to an unrelated partyWhen you converted rental property into a personal home. The rental home had suspended passive-activity losses. So, you can continue to deduct the suspended passive-activity losses from other passive income. If you have no other passive income, the suspended losses remain suspended. Carry them forward until you sell the home in a fully taxable transaction. You cannot take the interest deduction on the line of credit. The only interest deduction you can take is that which is considered mortgage interest. A line of credit generally doesn't fall into this category ...unless it is a home equity line of credit. In which case, it would be a mortgage interest expense.
Expert:  Angie replied 6 months ago.
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