[waitspring]

Hi, I have a question on the Mortgage Interest.

The qualified residence can deduct the 1st and 2nd home mortgage. Both needs the owner live in at least 14 days. This is itemized deduction record in schedule A.

The rental house mortgage is in schedule E, decrease the rental income.

My question is: these two mortgage both decrease gross income to taxable income, expect they are record in different schedule, I don’t see there is any actual effect/difference between these two mortgage in tax.

Am I right? I just want to understand it better.

Thank you for your time and your advise in advance!

Anna

[Anonymous]

There is a limit on deduction from rental activity. If you don't actively participate, it's limited to your passive income, the rest is carried forward.

[ibCPAsoon]

In some situtations – the net effect may be the same.

But the overall tax implication could be effected – it all depends.

Like Anjana – there may be loss limitations associated with the rental that had it been on Schedule A – you could have taken these losses. These losses are suspended until you can take them or the year you sell.

BEC - PASS JULY 2014
FAR - PASS DEC 2014
AUD - PASS FEB 2015
REG - PASS MAY 2015

[Missy]

Here's one distinction to keep in mind. The expenses allowed in schedule E are “above the line” to arrive at total income. The deductions on schedule A are “below the line” and can never exceed the adjusted gross income.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Author]

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