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Posted by ak_bat on February 1, 2008, 6:22 pm
Please log in for more thread options > On Feb 1, 1:27 am, ak_...@yahoo.com wrote:
>
>
>
> > On Jan 31, 8:35 pm, ak_...@yahoo.com wrote:
>
> > > Hi,
>
> > > I have couple of questions:
>
> > > 1. If I purchase land for investment, is the interest on loan used to
> > > make the purchase, or property tax paid on it deductible for income
> > > tax purposes?
>
> > > 2. If I purchase land for building a second home, and the process for
> > > building the home will take abt 24 months, when can I start deducting
> > > the interest and property tax (if not right from purchase time).
>
> > > Thanks in advance for any information.
>
> > OK. So I did some research on this forum (should have done it before
> > posting...but oh well. Live and learn). So from what I understand,
> > for #1, it is only deductible as investment expense, not as mortgage
> > interest. For #2, I can deduct as mortgage interest as long as there
> > is a livable dwelling in 24 months. Am I correct? In either case how
> > is property tax treated for deduction purposes?
>
> > Another thing that I read on this forum was that if I was to take a
> > second mortgage on my existing home (for abt $400K) and buy the land
> > (or for that matter to buy land and build a house on it), then I can
> > deduct the interest on it as mortgage interest. Is that accurate? Or
> > does the second mortgage have to be used to improve my first home
> > itself?
>
> > --
> > << ------------------------------------------------------- >>
> > << The foregoing was not intended or written to be used, >>
> > << nor can it used, for the purpose of avoiding penalties >>
> > << that may be imposed upon the taxpayer. >>
> > << >>
> > << The Charter and the Guidelines for submitting posts >>
> > << to this newsgroup as well as our anti-spamming policy >>
> > << are atwww.asktax.org. >>
> > << Copyright (2007) - All rights reserved. >>
> > << ------------------------------------------------------- >>
>
> The deductibility of interest on an equity loan is limited unless you
> use the tracing rules. The limitation says that you can deduct the
> interest on no more than $100K equity loan on your schedule A. And
> that interest needs to be added back for the AMT calculations.
>
> If you want to deduct interest on MORE than $100K in equity debt you
> need to follow the tracing rules. This will allow you to deduct the
> interest on the schedule where it belongs. For example, if you took
> out a $400K equity loan on your home and you used the money in the
> following ways, you'd report the interest as follows:
>
> $100K to fix up your home - this is now converted to acquisition debt
> and is fully deductible with no add back for AMT.
> $150K to buy a rental property - This goes on Schedule E;
> $100K to buy land as an investment - This is investment interest and
> is subject to investment income
> $50K to put the kid through college - THIS is the ONLY real equity
> debt you and is deductible on Schedule A BUT gets added back for the
> AMT calculations.
>
> Good luck,
> Gene E. Utterback, EA, RFC, ABA
Thanks for that and it makes sense. What about deductions for Equity
loan for less than 100K? Is that fully deductible?
========================================= MODERATOR'S COMMENT:
Please try to trim some of the quoted material no longer needed
for your reply. Thank you.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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