Dear Tax Talk,
I currently own a house and I'm paying the mortgage payment. I wanted to buy another house for my retired parents to live in. Both houses are going to be in my wife's and my name. My question is, will I be able to claim the interest deductions on both houses, since my parents are not paying any rent or mortgage payment?--Stanley
Dear Stanley,
Home mortgage interest is an itemized tax deduction on Schedule A of Form 1040. There are various conditions and limits that apply to deducting mortgage interest. You must be legally liable for the loan.
The mortgage must be a secured debt on a qualified home in which you have an ownership interest. A qualified home is your main home or a second home. Your main home is the property where you ordinarily live.
If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You do not have to use the home during the year. If you have more than one second home, you can treat only one as the qualified second home during any year. This means a second home occupied by your parents would qualify as a second home for purposes of the home mortgage interest deduction.
Home acquisition debt is a mortgage you took out after Oct. 13, 1987, to buy, build or substantially improve a qualified home (your main or second home). It also must be secured by that home. The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million.
