Harman, Home Buyer in Virginia

Can you get tax credit on your rental home for the mortgage interest paid?

Asked by Harman, Virginia Sat Dec 20, 2008

I am thinking of purchasing a new home and renting my current one. Would you get a tax credit on the mortgage interest paid on your rental home? I know that you can get a tax credit on your primary residence. What about your rental home? Thanks for your answers.

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Len Bowen, Agent, Provincetown, MA
Sun Dec 21, 2008
BEST ANSWER
Any rental prfoperty is treated as a "business" so you offset against the income all operating expenses, including the mortgage interest AND depreciation.

However, while I'm no accountant, if you plan to sell your first primary residence, proceed with caution, as in order to shelter profit on that sale from taxes(up to$500,000) you must have lived in it as a primary residence for two of the last 5 yrs.

CHECK WITH AN ACCOUNTANT BEFORE YOU DO ANYTHING!
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Dp2, , Virginia
Sun Dec 21, 2008
Make sure that accountant is a CPA, and you should interview a few of them. You want one who has experience working with real-estate investors, so that s/he should be knowledgeable about which set of tax deductions will apply for your situation. You should also speak with that CPA and/or an attorney about setting up an entity (a corporation, LLC, etc) for handling that rental--both for the tax benefits and various liability issues.
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