Question

Natalie owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her condo:

Insurance                                                      $1,000

Advertising expense                                          500

Mortgage interest                                            3,600

Property taxes                                                    900

Repairs & maintenance                                  650

                        Utilities                                                                  950

                        Depreciation                                                       8,500

During the year, Natalie rented out the condo for 75 days, receiving $10,000 of gross income. She personally used the condo for 35 days during her vacation.

what is the total amount of itemized deductions for mortgage interest and real estate taxes related to the condo?

Answer 1

ANSWER

Particulars		Amount($)
Gross Rental Income		$10,000
Tier 1 expenses:
Advertising expense	$500
Mortgage interest 3,400x75/110	$2,319
Property taxes 1,500x75/110	$1,023
Less: Total Tier 1 expenses		$3,842
Balance		$6,158
Tier 2 expenses:
Insurance $1,000x75/110	$682
Repairs & maintenance 650x75/110	$443
Utilities 950x75/110	$648
Less: Total Tier 2 expenses		$1773
Balance		$4,385
Tier 3 expenses:
Depreciation 8,500x75/110=$5,795 but the deduction is limited to the remaining income		$4,385
Balance		$0
Total "For AGI" deductions ($3,842 + $1773 + $4,385)		$10,000

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