Question for the Money Doctors
Question submitted on Jun 2, 2013.
QuestionStrange question - as an NYC resident, I will rent for my entire time here. I have, in fact, just purchased my very first home, which I will be moving to in about 10 years. I am currently retiring my mom into it.
I know that if it was my primary residence, I'd get a huge tax break - but surely I can't be the only NYC resident who's run into this issue. Found the perfect house young, used NYC salary to fix it up, and then moved out on the cheap to retire?
Are we just plum out of luck?
Thanks so much!
I believe you are referring to the home mortgage interest deduction available if you file Form 1040 and itemize on Schedule A. The deduction is available to you if the debt has been secured by a qualified main home or second home.
According to the IRS, your main home is “the home where you ordinarily live most of the time”.A second home is “a home that you choose to treat as your second home”. You do not have to use the second home during the year.
Assuming you are not renting to your mother, then the IRS would consider your house a Second home not rented out. The mortgage interest would be fully deductible. Also, the corresponding property taxes are deductible on Schedule A and provide a tax benefit, presuming you are not subject to Alternative Minimum Tax (AMT) on your return, which is unfortunately common for residents of high tax states such as New York.
For additional information visit http://www.360financialliteracy.org/