So what is passive interest anyway? Any rental or royalty generating property is normally a passive activity, which can limit your current deductions in it depending on whether you actively manage the property or not (having a property manager doesn’t mean you don’t actively manage the property.)
The financing on this property is considered passive interest expense and, like all the other rental expenses, is governed by the passive loss rules. Here is an article from Turbotax that covers all passive items in detail:
http://turbotax.intuit.com/tax-tools/tax-tips/Rental-Property/Real-Estate-Tax-and-Rental-Property/INF12039.html
As usual, if you have questions, call me at 818-317-6035 or email me at bstonercpa@sbcglobal.net and we can discuss them.
On Monday we can talk a little about charitable contributions.
You can count on us to count for you!