Deducting mortage interest on a rental property (first home)…?
June 27th, 2010 | by admin |My husband and I are considering buying a 4 family house. This will be our first home and we do NOT plan on living in it. We currently rent an apartment which is much closer to our jobs and we want to stay in the apartment. We want to rent out the 4 family house if we buy it.
Would the mortage interest on the 4 family home be tax deductible? And if we choose to some day buy a 1 family house for ourselves to live in would that mortgage also be deductible? Thanks!
For tax purposes the rental property would be seen as an income bearing asset.
You would file taxes as if it were a business in that the rent you receive would be considered the business’s revenue. From the total revenue you can deduct the expenses related to running the rental property. These deductions include, property taxes, mortgage interest, repairs, etc…
When you buy a house for yourselves, the taxes and interest would be deducted in your personal income tax return.
For details on each situation you should speak w/ your accountant and Publication 530 at the irs website:
http://www.irs.gov/publications/p530/index.html
5 Responses to “Deducting mortage interest on a rental property (first home)…?”
By Wayne Z on Jun 28, 2010 | Reply
Mortgage interest on a home that you live in is deductible on on Schedule A.
The income and expenses (including mortgage interest) from the rental property is reported on Schedule E.
If you do buy the home, it is probably time to see a tax professional. Rental property can be tricky to set up correctly for tax purposes.
References :
By bobby769 on Jun 28, 2010 | Reply
For tax purposes the rental property would be seen as an income bearing asset.
You would file taxes as if it were a business in that the rent you receive would be considered the business’s revenue. From the total revenue you can deduct the expenses related to running the rental property. These deductions include, property taxes, mortgage interest, repairs, etc…
When you buy a house for yourselves, the taxes and interest would be deducted in your personal income tax return.
For details on each situation you should speak w/ your accountant and Publication 530 at the irs website:
http://www.irs.gov/publications/p530/index.html
References :
By ninasgramma on Jun 28, 2010 | Reply
Your fourplex is a rental property. Rental income and expenses are reported on Form 1040 Schedule E. The interest on a loan to purchase or improve the rental property is deductible. It is subtracted from your rental income.
If your rental income is less than your expenses, you may have a deductible loss. This is an area for you to learn about, since your other income determines how much of a loss you may deduct. Read the instructions to IRS Form 1040 Schedule E to learn about this.
If you purchase a home to live in, that may be deductible on Schedule A as a personal deduction. The tax benefits of this deduction are determined by your income and other deductions. You may or may not get a tax benefit from this deduction.
References :
By Judy on Jun 28, 2010 | Reply
Be sure you tell the lender you don’t plan to live in it – mortgage rules are different for rental property than for your own home.
On a rental, mortgage interest is an expense, taken on schedule E. If you later buy a home to live in, that interest would go on schedule A. You could have both at the same time.
References :
By tro on Jun 28, 2010 | Reply
from your story this is not your home, you admit you are not going to live in it, therefore it is rental property and you will report your income from it on Sch E, report your expenses, including the mortgage interest and include this with your 1040
it will not be deductible on Sch A, it is being reported on Sch E
References :