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Will the interest for my increased mortgage on my principal residence be deductible for AMT?

August 12, 2011


From:  John
Date:  30 Mar 2009

Mike,

I am a middle class taxpayer getting walloped by the alternative minimum tax. (One reason – I have nine children!)

I know mortgage interest is still deductible under the AMT rules.

I have a rental property with a $100,000 mortgage but cannot take any take any deductions for the rental loss because my income is too high.

I want to refinance my principal residence and use the mortgage proceeds to pay off the mortgage for the rental home.

Will the interest for my increased mortgage on my principal residence be deductible for AMT?

John

Answer

Date:  6 Apr 2009

Hello John,

It won’t be currently deductible.

Only interest for a mortgage incurred (or replacing) an amount for the purchase or improvement of the principal residence or a second (personal) residence and secured by the residence is deductible for AMT.

The "best" treatment for the additional refinanced interest is to allocate it to the rental residence, but it will still be subject to the passive activity loss limitation. Sorry.

Good luck!
Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Will the interest for my increased mortgage on my principal residence be deductible for AMT?

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