Weird Situation

[Ows News]

I have an unusual situation that relates to tax.

I bought a house in California a couple of years back. I bought the house in anticipation of moving to California. However, for personal reasons, I decided to stay in Boston. I rented the house in California and the property is cash flow negative. To make matter worse, the property was classified as a passive investment, hence I could only use a portion of the negative cash flow to shield some of my annual tax (from working). In other words, there is a limit to how much you can use to shield taxes.

I currently have a home in Boston. I owned that property. With respect to the house in California, my parents have decided to move into it in July. They will not be paying the rent. I am doing this because my parents are in retirement and I want to take care of them.

In other words from January to June, I collect rent from my renter. But after July, I will be.

My confusion is over the tax law that relates to this. Do I classify my property as a "passive investment" for six months and then reclassified it as a "second home." This is stupid question but is the mortgage interest on the second home.. tax deductible?

Thanks.