Mortgage Interest

[MargaretMort]

Daughter and her husband own a house in one state that is now a rental. They own the house they are living in in another state. They refinanced the mortgage on his mother's house, it is now in their names and they pay the mortgage and property taxes. His mother still lives in the house but does not contribute to the mortgage or property taxes. My understanding is that they can take the mortgage interest and property taxes on their residence and the house his mother lives in. Obviously the expenses of the rental are taken against the rental.

Daughter wanted to know if there is any reason they can't take the mortgage interest and taxes since they don't live in the house at any time. It actually isn't too far away from their residence. I said I didn't think there is but I would ask all of you for your opinions.

As always, thanks. MM

[Pacun]

I think they could claim both houses for personal use and deduct interest and taxes. One a primary home (where they live) and the secondary where the mother lives. There are only 3 ways to treat the house where the mother lives: 1.- Personal use, 2.- Rental property, 3.- Investment property. Based on the facts, I think it will qualify only for personal use.

Think about this: If FMV of rent for the house where the mother lives was $1000 per month and the mother paid only $900 per month to his son. If son wanted to try that property as a rental property and take depreciation, the IRS will say "NO". That's personal use because it is below FMV and you are related parties.

[MargaretMort]

My thanks for backing up my thoughts. I have always been able to argue myself into the wrong decision, nice to know I didn't do that this time. MM