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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29975
Experience:  Taxes, Immigration, Labor Relations
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I purchased a home mother to live in. My understanding

Customer Question

I purchased a home for my mother to live in. My understanding is that if I pay the entire rent I can take the interest deduction. Can I still do this if she contributes a small amount as rent?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.
Hi and welcome to our site!
You may deduct mortgage interest on your primary AND secondary home.
Based on your information - that is your secondary home - so - yes - mortgage interest is deductible the same way as for your primary home.
You will be also able to deduct real estate taxes you paid.
Regarding "a small amount as rent" paid by your mother - that will classify your activity as not-for-profit rental.
Specifically for reporting - see IRS publication 527 - page 16
If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.
Where to report. Report your not-for-profit rental income on Form 1040, line 21.
Let me know if you need any help with reporting.
Customer: replied 2 years ago.
Lev,Can the two be combined. I.e., can I take the second residence mortgage interest deduction and claim the property as a not for profit rental, or are the two mutually exclusive?
Expert:  Lev replied 2 years ago.
Yes - these are not exclusive. You still may deduct mortgage interest and rent the same property without intention to make a profit.See that referenced publication 527 same page 16 - right columnIf you are filing Form 1040 and you itemize your deductions, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040). Claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or Schedule A....Please be aware that ONLY one secondary home is allowed fro mortgage interest deduction. For instance - if you have more than one - you may choose any - but may deduct mortgage only on your primary AND one secondary home.