Itemized interest deduction for rental property in the mid year

Forum|Forum|3 years ago
February 26, 2023
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I have a condo which was my primary residence. in the mid of 2022. I bought a house and moved into it, then rented out the condo. How do I calculate the interest deduction for itemized deduction with limit?

both mortgage are after 2017.

Condo mortgage: $300,000; Interest: $10,000

House mortgage: $900,000; Interest: $15,000, Points: $6k

I rented out the condo on June 15, 2022. (200 out of 365 days in service)

Obviously the total mortgage is over $750,000 limit

Should my interest deduction be like this?

- Personal portion of condo mortgage: 300k*165/365=135.6k

- Personal portion of condo interest: 10k*165/365=4.52k

- Then, interest deduction for itemized deduction be (4.52k+15k+6k)/(135.6k+900k)*750k=18.48k

and then, 10k*(200/365)=5.48k be interest deduction for rental expense?

Also, I see there is a saying that mortgage interest can be deducted using second home more than 14-days or 10% of rental. So, should I deduction all interest in itemized deduction and leave $0 for interest expense for rental?

DavidD66

You can start deducting your rental expenses on the date the property was made available for rent. So, if your condo was available for rent on June 1, you can start deducting expenses on that date. You can deduct 100% of the condo interest up until the point you purchased your house, at which point (or close to it) you would start to deduct your house mortgage for itemized deductions. You would then be able to deduct the interest on your house, which would be 750/900 * $21,000. You don't need to calculate the "personal portion of condo mortgage". If there was an overlap of between purchasing the house and placing the condo in service, use the house interest and don't deduct any condo interest for that period.

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