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Can I take a tax credit on interest paid for investment property in Puerto Rico as well as rental property in PR.? one of my clients is a resident of New York, but has two properties in PR. One is rented and the other is a vacation home. Can someone help me?

I understand that when income is been received you need to report worldwide income and credits. ive been trying to look for more information on this scenario but have been unable to get the right answer.

thank you,
Real Estate income and credits outside US.
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Tax Professional Answers

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John Stancil
There is no tax credit available for either of these items, but you may be able to take a deduction for one or both. The interest on the investment property is deductible to the extent that the client has qualified investment income. Form 4952 would be used to determine this, and the deduction taken on Schedule A. Qualified investment income does not include anything taxed at the long term capital gain rate. If the interest can't be deducted, it can be added to the cost basis.

The mortgage interest on the rental property is deductible on Schedule E. It would be treated the same as a rental property down the street. The mortgage interest on the vacation home would be personal mortgage interest deductible under the same rules for residences located in the US. Since it is a vacation home, it would be treated as a second residence.
Leave a Comment 380 weeks ago

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Question Owner
Mr. Stancil, thank you for your answer, let me correct myself with the tax credit I meant to say a deduction and your answer clarified all my doubts.
thank you.
Reply 380 weeks ago

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