All Forum Posts by: Bob Sacamano

@Michael Plaks thank you so much for your reply! One clarifying portion, the 800$/month my sibling is paying is intended to go towards their ownership into the home. Because they put nothing in the down payment, this would equate to at best .15% ownership per payment. Meaning I would still be the majority owner of the home.

From my understanding, here is my best legal way of filing. I have two properties 

1. 420k mortgage - 8% interest.
- I can take the full interest paid on half (210k with ~16k interest) for the rental
- I can take the full interest paid on the other half (210k with ~16k interest) as a personal residence second home.
2. 660k mortgage - 3.25% interest
- I can take 540k (to total the 750k personal limit) of the 660k.

Supposedly the IRS allows you to use any reasonable method to calculate your deductible mortgage interest expense. 

https://www.thetaxadviser.com/issues/2012/may/clinic-story-07.html

As of 2/28/2023, final regulations have not been issued.

Hello!

I can't seem to get a straight answer online by searching for this. My situation is:

1. W2 income puts me in 35% tax bracket.
2. Purchased a duplex with sibling as co-owner that will occupy one half of duplex.
3. Other half is rented out.
4. My sibling's W2 income is 12% tax bracket.
5. Sibling will pay less than half of market rate for rental
6. Interest is ~34k, rent is ~1.8k for half rented, sibling will pay 800

I'd like to deduct the full property interest from my income, but I'm unclear on the best way to structure this. I see 3 options, but maybe there's more?:

Option 1:
- Claim half interest, depreciation, property taxes, insurance, etc., claim rental income
- Sibling claims half interest as primary residence.

Option 2: 
- Claim full interest, claim rental income from tenants and sibling

Option 3:
- Claim full interest, claim rental income from tenants and charge sibling close to full rental (1.6k)

Option 2 is the best, but because it's so far below market rate, I'm not sure if it that would cause problems. I can easily gift my sister the difference tax free, but then I'd have to pay taxes on the income still.

Also, can I deduct the full property tax and depreciation or only half with option 1? I'm assuming I can only do half for everything.