I have a question regarding income tax return with a property I bought in 2005 and I’m hoping one of you can help me.
I’m using Turbotax to file my 2005 tax. I entered both of my residential and second home 1098 (mortgage interest). I’ve also entered the same amount of 1098 I entered in Deduction section in Income where they ask for interest paid on rental.
Is it usual to enter the same 1098 amount in both Income and Deduction when filing the tax? The instruction says that if your rental qualifies as 2nd home, you CAN enter 1098 under Deduction.
It seems a bit odd that you can deduct the same thing twice??
How many properties do you actually own and how are they used?
A primary home and a second home are held for your personal use. You can only have one primary and only one secondary. An investment property is property held for the production of income and/or for long term appreciation. As a general rule, an investment property is not your primary or second home.
If you have a primary home, a secondary home, and a rental property with a mortgage loan on each, then you report the mortgage interest on your primary and secondary homes on Schedule A if you itemize your deductions. Report the mortgage interest for your rental property on Schedule E.
Mortgage interest that you pay is not income. Do not enter it on any tax schedule as income. Do not duplicate your entries for the same 1098…
If you really have only two properties, and your second home is reserved for your personal use part of the year and used to generate rental income part of the year, then you have to prorate your 1098 between the personal use and the rental use. The portion of your mortgage interest that applies to personal use would go on Schedule A as a home mortgage interest deduction, while the portion allocated to your rental use of the property would go on Schedule E as mortgage interest.
For example, let’s say that your second home is a Florida condo that you personally use six months of the year (say November through April), and put in a rental program for the other half of the year. Half of your mortgage interest would go on Schedule A, half would go on Schedule E. Same with your property taxes.
I have primary residence where I live. I bought my 2nd property as rental in Oct 05 and it was available at Oct 21st, but it sat empty for the remainder of the year because I could not find any tenant.
I did some search in Turbotax and found you cannot double “post” 1098 as both interest paid and deduction for 1098 on Sch E. Turbo tax is not smart enough to cross check the amount of 1098 for Sch A & E.