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Subject:  Re: Rental Property and mortgage payments Date:  2/9/2001  11:32 PM
Author:  pmarti Number:  46106 of 127549

My wife and I own a home which we purchased in mid-1998 and moved out of mid-2000. We immediately had renters move in. When filing this year, should we list ALL mortgage interest payments on Schedule E? Or should we split them between Schedule E and itemized deductions?

You split them according to the personal/rental use periods. A tip: if you're using software to prepare your return, lie to it when it asks you whether you used the rental property for personal use during the year. It really means did you use it after you converted it to rental.

Additional info:
1) We purchased the home with a VA loan.
2) We use a property manager to manage the day-to-day operations and maintenance.

Also, what is the procedure for depreciating the property? We plan on moving back into it sometime in the future.

Your basis for depreciation is the lesser of your basis in the property or its fair market value as of the date you put it into rental service. You may as well claim the depreciation expense in accordance with what Publication 527 tells you, because when you sell you'll have to recapture depreciation whether you took it or not.

Phil Marti
VITA Volunteer

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