Qualified Residence

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Qualified Residence

The place where a person primarily lives. If one owns his/her qualified residence, he/she may write off the interest on the mortgage from his/her income.

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Qualified Residence Interest

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The Tax Court held that, in calculating qualified residence interest, unmarried taxpayers must apply the debt limits for home acquisition and home equity loans to their total joint indebtedness on qualified residences rather than to each of their shares of the indebtedness.

163(h)(3)(A) permits taxpayers to deduct interest paid or accrued during a tax year on acquisition indebtedness or home equity indebtedness for a qualified residence, which is defined by Sec.

Unmarried co-owners must allocate mortgage interest limits

Qualified residence interest is interest on acquisition indebtedness or home equity indebtedness with respect to a taxpayer's qualified residence (in this case, there was no question that the residences involved were qualified residences).

On audit, the IRS disallowed a portion of both taxpayers' deductions for qualified residence interest for 2006 and 2007.

Qualified residence interest limits apply on a per residence basis

Another potential pitfall is the effect of carryover basis from the sale of a prior residence under the old law where gains on qualified residences were deferred not excluded.

A single taxpayer, on the other hand, generally is allowed to exclude up to $250,000 of gain realized on the sale or exchange of a qualified residence. The new rules also eliminate a number of restrictions contained in the prior law.

Planning for home sales in a divorce and some pitfalls to avoid

"Aggregate amount" probably means the total debt secured by one or more qualified residences, not just that secured by any one qualified residence.

163(h)(2)(d), "qualified residence interest" (QRI) includes interest paid or accrued during the tax year on (1) acquisition debt on a taxpayer's qualified residence or (2) home-equity debt on a taxpayer's qualified residence.

Election not to treat debt as secured by a qualified residence

A mortgage obtained after October 13, 1987, to buy, build or substantially improve up to two qualified residences is qualified home acquisition debt; interest on such debt is fully deductible.

Once taxpayers buy or build qualified residences, making substantial improvements is the only way to increase acquisition debt without buying another home.

Deductibility of mortgage points and interest

Both taxpayers age 55 or over: If one or both spouses own qualified residences, but only one spouse plans to sell, the timing for selling the home and making the election depends on whether the new spouse has previously made an election.

The NRX paying the mortgage cannot deduct the interest, because the home is not the NRX's qualified residence under Sec.

Maximizing gain exclusion/deferral when selling a principal residence due to death, divorce or marriage