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.
95 weeks ago
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.