Claim mortgage interest on third home
Dear Tax Talk,
I own two homes. One is my primary address and one is in New York. They are paid in full with no mortgage. I recently bought a third home and I do have a mortgage. So, can I claim mortgage interest paid for this third home? Can I deduct the property taxes that I pay on all three homes and the management costs of two of my vacation homes?
It seems you like to collect vacation homes. Hopefully you get to enjoy them. Individuals can deduct the home mortgage interest on their primary residence and one other personal-use home. Since you don't have a mortgage on your primary home, you would only be concerned about the mortgaged property. Even though this is your third home, you can choose to claim mortgage interest on that home. In other words, in any year you can choose which home other than your primary residence will be used for purposes of claiming the home mortgage interest deduction. Your only limits are the overall qualifying debt limitation of up to $1.1 million.
The second home must also be a qualifying home, which basically means you don't rent it out, or if you do rent it, that you also use it personally during the year as a vacation home. To be considered a vacation home when rented out, you must use the home for the greater of 10 percent of the days rented or 14 days. For example, if you rent the home for two months during the year, then you would need to use it as a vacation home for at least 14 days to qualify for the home mortgage interest deduction.
Real estate taxes paid during the year on all of your properties are tax-deductible. You are not limited to two homes as in the mortgage interest deduction.
Unfortunately, the management or maintenance costs of the two vacation homes as well as your primary home are not tax-deductible.
Ask the adviser
To ask a question on Tax Talk, go to the "Ask the Experts" page and select "Taxes" as the topic. Read more Tax Talk columns.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.