I rent a home in Connecticut and my wife and I work there. We purchased a home in Kentucky to have a convenient place to stay when we visit family, which we do at least every couple of months. Eventually, we will retire to the home in Kentucky. The Kentucky home is our only mortgaged property and it is not rented. Can we deduct the mortgage interest and property taxes on our federal and Connecticut state returns?

ANSWER

The BIDaWIZ Team's Answer:

Yes, you can deduct both the mortgage interest and property taxes paid on your second home in Kentucky. Specifically, you can deduct interest payments on up to $1.1 million of mortgage debt on your first and second homes. The property taxes paid are also deductible. This is referenced in IRS Publication 936 and IRC Section 162(3)(C). As for Connecticut, you will not be eligible for the property tax credit since the home isn't located within Connecticut.