Mortgage Interest Tax Deduction on Rental Property

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As pointed out by reader Jason, another consideration when evaluating the cashflow potential for a rental property is whether you can deduct the mortgage interest on your taxes. To see what the rules are, I always like to start directly at the source, which meant a stroll through those fun IRS publications.

First, I started with IRS Pub. 936, Home Mortgage Interest Deduction. There is the basic definition of a “qualified” home:

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

Then there is the question of how much you live in the second home:

Second home rented out. If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. If you do not use the home long enough, it is considered rental property and not a second home. For information on residential rental property, see Publication 527.

If you live in it enough, it is treated as a “vacation” property and you can deduct the mortgage interest. In general, you are limited to the interest paid on the qualified loan limit of $1,100,000 for “home acquisition debt” combined for both first and second houses.

However, for a full-time rental, we are led to IRS Pub. 527, Residential Rental Property, which states:

Generally, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income.

Interest expense. You can deduct mortgage interest you pay on your rental property. Chapter 4 of Publication 535 explains mortgage interest in detail.

Okay, now I’m off to IRS Pub. 535, Business Expenses, specifically the section on Interest.

You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your trade or business. Interest relates to your trade or business if you use the proceeds of the loan for a trade or business expense. It does not matter what type of property secures the loan. You can deduct interest on a debt only if you meet all the following requirements.

* You are legally liable for that debt.
* Both you and the lender intend that the debt be repaid.
* You and the lender have a true debtor-creditor relationship.

There are special rules for the capitalization of interest if you actually build the home yourself.

I am not a tax professional, but from reading the above publications, it appears that mortgage interest on a 100% rental home is not tax-deductible as an itemized deduction as your primary house may be.

However, chances are that it is an eligible expense that can offset your rental income and still reduce your tax burden in a similar manner. If you made $10,000 in annual rental income but paid $8,000 in mortgage interest, and ignoring other factors like depreciation, you’d only owe income taxes on the difference of $2,000. (Dealing with writing-off rental losses is for another post.) The amount paid that lowers your loan principal is not an eligible expense.

As long as you have adequate rental income, this would make the mortgage interest as an expense better than just an itemized deduction, since everyone gets the standard deduction. For 2009, the standard deduction is $5,700 for single filers, and $11,400 for married filing jointly. Only total itemized deductions above that amount would provide added savings.

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  1. Mortgage interest expense is deductable on Schedule E. It can offset income if you are a passive investor. If you are an active investor you may be able to offest up to $25,000 in loses against other income.

  2. Vince Powell says

    Counting mortgage interest against income seems to be far better than counting it as a deduction. The posts insinuates that the deduction is better. Maybe I read it wrong…

  3. More posts like this please!

    I’m looking to move and rent out my current residence. I’m trying to determine if the income is worth the effort, and it is really hard to tell.

    In addition to the mortgage interest, I believe you can write off the depreciation of the house as well over 27.5 years. So if you have a 275K house, you can write off 10K each year to depreciation. (Again, I’m not sure about all this as I’m still figuring it out myself.)

    It appears the combination of mortgage interest expenses + depreciation + repairs/maintenance would almost always insure your property had a loss on paper even though you would potentially be making money on rent.

    If anyone has any experience with this, I’d love to hear about it… Not sure if I’d just be better off buying a REIT to get real estate exposure and selling my house and not dealing with the hassles of being a landlord.

  4. Added the last paragraph:

    “As long as you have adequate rental income, this would make the mortgage interest as an expense better than just an itemized deduction, since everyone gets the standard deduction. For 2009, the standard deduction is $5,700 for single, and $11,400 for married filing jointly. Only deductions above that amount would provide added savings.”

    The problem comes when you are trying to make losses offset your income. There is a $25,000 limit as long as you are a passive investor (don’t spend majority of time as real estate pro). But then there are income phase-outs when your adjusted gross income is over $150k. But THEN, you can carry the losses over for future income.

    Like I said, enough for another post!

    Depreciation is also tricky since it seems you’d get hit with the taxes anyway if you eventually sell the house. Does improve cashflow though.

  5. Is the $25K limit for passive or non-passive? What’s the technical difference?–and what are the advantages of each? I suppose this may be another post …

  6. As Paul said, you deduct mortgage interest on rentals as an expense in Schedule E. All your rental expenses are in schedule E.

  7. Great info, like Maury I’ll eventually rent out my current house. I have a lot to learn before then as to the economics of being a landlord.

  8. Do not forget the depreciation, at the time when you sell this property assume there is a gain, but even if there is not, one must recapture and depreciation allowed or allowable, in other you must recapture the depreciation whether you took the expense or not! This can be huge. But don’t forget land is not depreciable, so if you own a $250,000 house and the land is worth $100,000 only $150,000 will be the amount depreciated. Oh you need a new water heater, cost must be depeciated.

    BTW if you go collect the rent or go check on the property you are non passive usually best to be non passive.

    There are lots of expenses in owning property like each time you go collect the rent – mileage. Course that is a good time to replace the furnace filter (lets you get in the house)

  9. LargeTalons says

    I used to occupy 1/2 of the duplex I own. During that time I could deduct 50% of my mortgage interest as an itemized deduction. The other 50% was a business expense that helped offset the rent I was paid. Maury, I always showed a paper loss after depreciation was added in, and so my rental “loss” did actually come right off the top of my income. This was actually better that the 50% itemized deduction, because as Jonathan pointed out, the standard deduction nullifies a large portion of that itemization. As for the depreciation being recaptured at time of sale, that is true because it reduces your basis by the depreciated amount. However, the recapture is taxed as capital gains, and is therefore less than the income tax off the top of your bracket (depending on what bracket you’re in I suppose).

    I now rent out the entire duplex. Even though I can now deduct 100% of the mortgage interest as an expense, I take in twice the rent, so my paper loss is much less. I don’t get to deduct my current rent where I live (moved for employment reasons), so it is actually much less efficient than living there (tax wise).

    I suppose my point is that an owner occupied rental has some additional benefits and is quite a cheap way to live. Owning a fully rented property to me is actually more hassle than its worth financially, and I wont be doing it again any time soon. This is especially true if you cannot do almost all required maintenance yourself. I wouldn’t think this sort of investment really starts to pay off unless your heavily leveraged and own a dozen properties. Of course, higher risk, higher possible return. In my opinion, casually investing in property outside of an owner occupied situation is almost always going to return less than a balanced paper portfolio. I would have never thought this before I actually owned property, but I tend to side now with argument in the following article:

  10. There are many ways to handle borrowing money for rental properties. For those that make above the passive loss phaseout of $150k you might be better off borrowing additional amounts from your primary residence (which can be deducts as mortgage interest for your primary residence) as a itemized deduction. While not as good as a rental expense – if you can’t take the losses, its more advantageous than permanently carrying forward rental losses.

  11. Does anyone know how rental interest and business expenses factor in to AMT calculations? Are those deductions ignored for AMT like your personal home mortgage interest, or are they preserved like charitable contributions? My wife and I are just under the threshold for AMT eligibility, and I’m thinking that with the additional rental income and the deductions possibly ignored by AMT calculations that we would not see any tax advantages from a rental property.

  12. I don’t understand the confusion here. Mortgage interest on rental property goes on schedule E along with the other expenses. It is pretty straightforward. Don’t forget the depreciation! Losses on rental property are deductible against ordinary income subject to the passive loss limit. Hire a CPA!

  13. Lots of very interesting things in the post and comments. I’m a tax attorney and a real estate investor, so I feel like I’m on my home turf with this post. 🙂

    Let me throw out a few thoughts I had while reading the post and comments.

    First thought: Showing a gain for tax purposes is different than being cash flow positive, and both are different than my true economic gain on a property. I nearly always show a loss FOR TAX PURPOSES on every property the first few years. Generally my cash flow is close to breakeven in the beginning. My true economic gain should be higher than my cash flow because of appreciation on the property (knock on wood). Over time my gross income grows (rents rise) while my costs largely stay the same (fixed mortgage, insurance, property tax, etc.). As a result my cash flow grows and my tax loss shrinks over time.

    Second thought: When I consider a property, oftentimes it’s the tax savings (from the tax loss I know I will show) that make the difference between buying or not. True some of the tax loss is due to depreciation that may be subject to recapture some day. But that’s okay, I love deferral. And if I really want to avoid the recapture altogether, I can do a 1030 exchange (actually further deferral), or sell the property in a year when I have low income and won’t pay much tax (it helps that I’m self-employed), or hold it until I retire and thus have lower income. Or hold it until I die so my heirs get a step-up in basis (they might have recently changed this rule though). Or donate the property to charity someday. Lots of ways to avoid the recapture if you really want to. And even if you can’t avoid it altogether, the deferral is still valuable.

    Third thought: whether I can be cash flow positive on a property largely depends where the property is. It is nearly impossible to be cash flow positive on a house in Silicon Valley for the first 10-15 years. But I can be cash flow positive on a Salt Lake City property the first year. It doesn’t mean the Silicon Valley house is a bad investment, but I’m much more dependent on appreciation to make it work. And I have to keep throwing money in for several years.

    Fourth thought: I did exactly what another commenter is contemplating. I moved out of a home I owned to become a renter. I continue to own my old home and have it rented to a nice couple. Without going into the details, I’ll just say the situation is murderous on my taxes, despite the fact that my tenants pay me the exact same amount of rent that I pay my landlord. I knew this going in. The move was made for non-financial reasons. The tax code heavily favors owner-occupied real estate, and this is a perfect example of that favoritism.

    Last thought: I agree with the post and comments that it’s better to have Schedule E mortgage interest (rental property) than Schedule A mortgage interest (itemized deduction) as long as you are able to use the Schedule E deduction. The post mentioned the standard deduction as the reason, but let me point out that it is true even if you itemize. The Schedule E deduction lowers your adjusted gross income, whereas the Schedule A deduction does not. This is very important because the phaseout for many deductions and credits is based on your adjusted gross income. An “above the line” deduction is generally more advantageous than a “below the line” deduction.

    Sorry for the long comment. I don’t comment much. When I do I get my money’s worth.

    Thanks for a great post Jonathan!

    • Thank you, Jeff! I know this is an older post but I just wanted to thank you. I just bought a house to rent to my son and his friends (yes, I DO need my head examined!!) and I understand better now why I need to go all in on this being rental property. Sure appreciate this set of posts.

      • Colleen,
        I know this was a while ago. I am going into the same process for my daughter.
        How did this turn out financially? socially? mentally?

  14. Mack jackson says

    Thanks for sharing such great info, it will help many people.

  15. Uncle Deuce says

    Confused first time buyer just wants to know this: can I deduct mortgage interest on my taxes if I buy a 2-fam house and rent out one unit? Don’t throw schedules my way, just yes or no.

  16. The short answer is yes. But when it comes to taxes short yes or no is really not enough of an answer. The interest on the rental portion is a defiant yes. All cost of renting for profit are deductible.

    The interest on the portion you live in … well it depends. If you have enough you can deduct it. Remember you get a standard deduction you must have more than that standard deduction to help you save on your tax.

    Now the cool thing is the rebate being offered until the end of November, up to $8,000 for first time home buyers there are limits due to income. Remember November not the end of the year.

  17. John Johnson says

    My wife and I have a rental propery and we make over 150K. How can we carry over the losses over for future income?


  18. we recently bought a second vacation home and are trying to sell the first. Can i deduct any of the expenses for the second home? we are going to rent the first one out until we sell it. what can i deduct on my return until i start generating income from rent. all this took place at the end of nov. So we are really renting it out in 2011.
    Thanks for any help.

  19. mariebry,

    Here are the rules, you can deduct all real estate taxes, you can deduct mortgage interest on two homes (but only the interest on the first $1,000,000) Now if you convert one house to rental for profit you report all the rent as gross income and all the expense (including depreciation) you do this on a Sch E.

    This is the real boiled down version.

  20. does anybody know the answer to this: investment property with cash-house worth $250k
    2.take out morgage on the home i live in of $400k (do not have morgage at this time)
    3. can i use the interest on $200k of morgage on primary residence to use as interest expense for investment property?

  21. Question regarding transition of rental property to non-rental property.

    I owned two homes in 2010:
    Home “A” = lived in this home from Jan thru mid-Nov. Put up for sale in mid-Nov and sold in 2011.
    Home “B” = rented this home out all of 2009 as well as Jan thru May 2010. This home sat empty from June thru mid Nov 2010. In mid Nov 2010, I moved out of Home “A” and into Home “B”.

    I carried a passive loss over from 2009 to 2010. For 2010, I have additional passive losses for the five mths the home was a rental.

    I am confused regarding two things at this point:
    1. I treated the rental property as passive b/c I thought that you had to be a real estate professional in order to consider the income to be non-passive. I just read on this blog that if you check on the property or collect a rent check, you can go w/ non-passive so am now wondering if I should have considered non-passive in 2009 and 2010.
    2. I read on the net that in the year you cease the passive income, you can take the passive loss carryovers against regular income. Wondering if anyone can confirm this. If this is true, then it won’t matter that I treated as passive activity since I’ll get to take all of the loss in 2010.


  22. I am about to put an offer on a modest $180,000 cabin (my 2nd home). I CAN pay cash, but and concerned that doing so will cause me to NOT have a deduction. Certainly not leveraging has its advantages, but a 10 year fixed at 3.5% interest seems like a great time to borrow this money and hold on to my cash.

    Am I better
    1) Paying cash for the cabin
    2) Borrowing at these great rates

    Is there a benefit for me renting this out over a few ski weekends in the winter? I don’t need the money, but does this allow me to deduct some additional expenses?

  23. I have the same question as Bill: If I borrow 400K from my primary residence and purchase 400K worth of rental properties, can I deduct the mortgage interest on Sch E as opposed to Sch A? Thx.

  24. If one takes out a mortgage to be deductible on Sch A it must be used to buy, build, or improve your residence.

    If you borrow money to buy rental property that interest is an expense to be taken against rental income it does not matter if it is secured or not.

    I am a professional tax preparer.

  25. Rick – Here is your quote:

    “If you borrow money to buy rental property that interest is an expense to be taken against rental income it does not matter if it is secured or not.”

    Question: what if the money you borrow to buy rental property is secured by your primary residence?

  26. John,

    It does not matter what is securing the loan, if you could do it, it could be an unsecured loan (good luck with that nowadays). If the loan proceeds were used to buy the rental house the interest is an expense on SCH E.

  27. Rick,

    I’m upside down on my mortgage and my partner is no longer helping me with the mortgage so I’m thinking of renting out my house and renting an apartment for myself. I’m trying to avoid a short sale or foreclosure.

    I can’t get enough rent to cover my mortgage, so I wanted to know if I can deduct the mortgage interest, which would make if easier for me to charge less rent.

  28. The short answer is yes. In fact if you are getting the fair rental value or more you can deduct your mortgage interest real estate tax depreciation (you must do this) and any other expense (home assoc dues perhaps) on a Sch E this may give you a loss (many rental properties have a tax loss) this would lower your income tax. This might further help your situation.

  29. @Rob…
    #1 pay cash for the cabin, assuming it will not exhaust all your cash reserves.

    Ask yourself… if you owned this $180,000 cabin outright would you go out and get a 10 year fixed 3.5% loan because the rates are great and you’d get a tax deduction? You’ll wind up paying the bank thousands of dollars in interest just to get a tax break.

  30. Question –

    We recently purchased a new home, and put our condo on the market. After 3 months with only 2 poor showings, we listed it for rent, and it was rented within a week.

    The rent we are collecting would cover the cost of the mortgage if it were not for the 1 month + $75/mo fee we have to pay to the management company that collects rent and maintains the property.

    I understand that we will be able to write off the mortgage interest for our new home, but I am confused as to handle the condo. For the first 6 months of the year, it was our primary (and sole) residence, so that will be mortgage interest.

    I understand that the day we listed it for sale/rent it became a rental property, so I can begin depreciation starting when it was advertised, so I will be able to claim 1/2 a year of depreciation on the asset.
    Here’s my question: if we are getting ~1000/mo in rent, but 500 is going to interest, does that mean I can write off 500 of the rent, but the remaining 500 will be counted as rental income? In this scenario, how would it look like a loss when reported?


  31. To follow up on Will’s post:

    Most condo’s have HOA’s (home owner association) fees. In a rental situation would these costs be captured as additional expenses in a schedule E?

    $1,000 rent
    $500 interest
    $200 principle
    $200 HOA


  32. Will and Jon,

    The Sch E is a simple income statement. Rent is the income. Depreciation, HOA dues, Mortgage interest, supplies, cleaning and maintenance, management fees etc are expenses, don’t forget mileage to meet with renters or RE agents or management agents. If the rent is more than the expense there is a gain if not a loss.

  33. What if the rental property is in another country? 100% of the time rented with mortgage paid to the foreign bank through a foreign account with money received from the rent in that country.
    I understand the depreciation would be 40 years instead of 27.5 but for the mortgage interest as an expense , is it still treated the same on Schedule E?

    With regards the mortgage interest deduction on sch A, would this property not be a “qualified home” and therefore the sch A deduction would not be possible but the expense on sch E is?

    Any other implications to consider for a foreign rental property


  34. Steve,

    If you are a US citizen you must report your world wide income. so there is no difference you just have to convert to USD. You may choose to elect 40 year not required. But if you started with 40 year must continue.

  35. Thanks
    Not a citizen, but am a permanent resident.
    are you absolutely sure about not having to do 40 years?

    So i presume you are saying too that 100% of mortgage interest can be claimed as an expense.
    Do i take the exchange rate on each date the mortgage is paid and get an average of them or pick the lowest/highest (or most favorable conversion)?

  36. Same applies for permanent resident. And Yes I am sure feel free to read Pub 527. But, you may use 40 if you desire, and if you have started with 40 year you must continue. And yes 100% of that cost is an expense on SCH E. Exchange rate should be figured each time there is a transaction. Also if there is a tax paid to a foregn government it can be taken as a one for one credit on form 1116, as long as it is not a government that support terrorism

  37. I presently have a owner occupied property with an adjustable rate of 2.875. I also have an investment property with a rate at 3.625. The former is fixed for the next five years while the latter adjusts every 6 months based on LIBOR. The principle owed on each property (around 290000) is near the same. For tax purposes which property would it be better to pay-off in the next 2-3 Years?

  38. Ive,

    Sadly there isn’t enough information to say. It depends on your marginal tax rate, the amounts of your other SCH A deductions, whether you are affected by AMT … etc.

    As my engineering economy professor once said “least cost is almost always the right answer”.

  39. John Storough says

    I am renting out my home in Boston and now live in DC. In DC I am renting my home. I would like clariffications and help with the following:

    What I am thinking is
    1) My mortgage interest on my home in Boston, I deduct it as part of itemized deduction. Treat rental income I receive on the property in Boston as income , deduct depreciation as an expense from that income. Is there any way I can deduct my rent paid in DC also as part of the expense?

    My rental income for the home is 3000$ and I pay the same in rent in DC. The home mortgage is today at 520,000


  40. Question – My husband and I have two rental properties…this year we accidentally went over the 150k mark which horribly ruined our tax breaks with the rentals, therefore making us ineligible to deduct this year. Can we carry over the losses of this year for next year, knowing that we will have far less income, and do we even report our rental expenses on our taxes this year?

  41. Christine, Yes you should report all your expense for by law you must report your income. And yes you can carry over your loss until you ca take it latter your report this on the correct form so the IRS and you have a record.

    John, if you are renting not for profit you can take depreciation mort interest and other expense up to the amount of the rent you collect but you may find using the SCH E and taking ALL expense there and using the standard deduction may save you more tax.

  42. Quick question from a new landlord. I am renting my former residence for less than what the mortgage is. Do I still claim this as income and just deduct the mortgage interest, HOA, insurance, expenses etc on the schedule E and then write off the depreciation as well to show a negative income for the property.

  43. Keely,

    The short answer is yes. That is exactly what you should do. Your rent is income on SCH E Your expense are as you stated. As long as your AGI is below $150K you get to take the loss.

  44. I’ve just become a landlord. My wife and I make over 150k. Is investing additional money in our 401k to reduce our AGI the best option to have better tax returns?

  45. Yes, the best way to lower you AGI is through your 401(k) You can each put 16K (22K if over age 50) if that gets you under 150K then it lets you take your losses now and not later when you seel the property.

  46. I have a confusing situation; maybe someone here can help sort it out. I moved out of my main home in August 2009, and it sat empty for a year while I tried to sell it. In September 2010 I listed it for rent, and in January 2011 a tenant finally moved in and stayed through February 2012. Another tenant started renting in March 2012.

    What I’m trying to figure out is how to handle deductions for 2010, which I now think I handled incorrectly. I didn’t realize that expenses associated with the time it was “available for rent” were deductible, and I’m planning to submit a corrected tax return. I’ve been looking at Pub 527, and while I had no actual days of personal use, the property was “held for personal use” for part of the year. Based on the “Property Changed to Rental Use” section (page 16), it sounds like for Sept-Dec I should move mortgage interest and real estate taxes from Schedule A to Schedule E and deduct other expenses / depreciation. Then I read “Exception for Use as Main Home Before or After Renting” (page 22) and became confused. Does this apply to me? If so, do I still divide up the expenses? This section says I should, but the two examples say I shouldn’t! Another thing I’m really worried about is somehow not being able to deduct my Jan-Aug expenses anywhere.

    Also, I see some of the commenters taking losses year after year. How do you manage to show that you’re engaged in a for-profit activity so that the income isn’t treated as hobby income?


  47. Bought home Nov 2004, second home for my Mom, she passed on and I have had the house rented for the first time throughout 2011. Even before factoring depreciation, I have a 1400.00 loss. I am confused on which formula to use (F4262) in order to figure out the depreciation.

  48. When will there be a rule where rental property can become a deduction like asthough you were living in it? It is a debt and getting a refund would be great and would help homeowners quite a bit, not to mention the economy ,since we all pay mortgages, what happens to the money then? where does it go if we dont get a refund ?

  49. Good discussion- here’s my scenario. I’m leaning toward declaring “married-filing separately” status. My wife (just married in 2011) owns a property that she is now renting out (now that she’s moved in with me). Together we make over $150K in income, but since she makes under $100K she can capture the rental loss deduction. Does that make sense?

  50. Hi, I’m a US citizen living in Los Angeles, California. I’m buying in a house in LA in the next 2 wks, actually in escrow right now, just found out I got a job offer in Australia, now if I rent out the house that I just bought and move to Australia and rent an apartment there, can I get tax deduction on my property tax in California (just like a US resident is entitled to) ??? Or tax reduction on HOA fees of a condo?

    I suppose I can’t get tax credit on housing cost I pay in Australia, my income bracket will be in the 125k/year range + 9% super.

    Thanks and I appreciate your response!

  51. HI

    I got married 5 years ago and my wife has a house (in CA where we live) in her name but my name is not on it. We do married filing jointly for personal tax. If i buy a house (in… Florida ) in my name only, is it considered a secondary or primary residence, or investment/rental property? What’s the best way to leverage this house financially? we will most likely move to Florida and live in this house when we retire…10 yrs.

    Thanks for your help.

  52. I own a home in California. I want to buy a rental property with positive cash flow in CA. Not much, maybe $100-200. Can i write off all expenses with the income property, interest, taxes, management if I make over 250k?

  53. Brett…. Kinda, but if your expense exceeds income you can just go to zero and carry over the Passive Loss until you can take it, (when you sell it or make less money.

    Jamkool, the house in FL would be a secondary house untill you see the CA house and move, your wife would get the 250K exclusion on the sale. The leverage qustion someone else will have to answer.


    If you rent out the house all the expense is taken against you income on the property, once you live down under for 360 days you can take the income exclusion.


    She has to make less than 75K to take all the loss if she has one. I suggest doing your tax both ways MFJ and MFS lots of pitfalls in MFS.

    Lii, It is a btter deduction, and it is up to congress, but they all need firing for not doing they job.

    Frank Use a program like Block at home it will walk you right through it.

    Wendy You just have a part year rental Just take your expenst for the part of the year you were trying to rent it or had it rented.

  54. Great comments! Rick, thanks for following up on this for so long with help for folks. Here is my simple question, beyond interest expense on a mortgage can you also add the mortgage payment “principal” as an expense or no? I’m guessing it’s just interest expense + depreciation expense + HOA on schedule E. even if you can’t cover the full mortgage with the rent. Right? I rent my place out but find that somehow the interest deduction gets me a better bang than schedule E here… I must be missing something!

  55. No paying back the principle is not an expense tax or otherwise. You get to take depriciation which is a part of the cost of the home.

  56. ANd I’m not sure what your saying about the interest deduction but it could not be better that taking all your expense on a sch D and tking the std deduction

  57. sorry SCH E

  58. I am going to be moving out of state and getting my primary home ready for rental. It is probably NOT going to be rented till jan 2013- 2months to fix it up.

    I will be actively working on it for renting it out and may hire property mgmt in jan 2013

    Since I will have no income from rent for 2012- will I be able to deduct the expenses incurred in 2012 getting the home ready for renting out ?

    What is considered officiallt the act of the home not being my primary residence for tax purposes ?

    Is it advantageous to be considered an active inestor for 2012 ? what all do I have to do in order for that to happen ?


  59. I have a question about using Schedule A or Schedule E. We moved out of our primary residence on April 15th and a tenant moved in April 16th. Do I split the mortgage interest, property taxes and insurance between these two schedules? Or do I claim it all on Schedule E?

  60. robert rhodes says

    I am buying my home which i live in as my primary residence. I recieve a mortage interest deduction on my taxes each year. I am buying a condo which i also have a mortage and pay interest. I occupy this condo and run my business out of this condo. My business is an s corportation. I pay rent to myself for this condo each month. Do i claim any kind of deduction for the mortgage interest for the condo mortgage.
    Robert Rhodes

  61. I have a home that we used to live in that we now rent. I have finished my taxes on HR Block at home, but I played a bot with the mortgage deduction. If I take it as an expense on the rental property, my taxes go up a couple thousand dollars over taking it on schedule A. Simple question:

    Can I take the deduction from schedule A or do I have to take it as a rental property expense?

  62. If I but a nyc property in cash and then remortgage, will I be able to deduct expenses of mortgage taken out after time if purchase. Should I delay purchase until mortgage is in place

  63. I’ve owned our home for 10 years, and will be building a bigger one this year. With just a basic knowledge of tax laws, it appears that renting out my current house could net better gains and provide a tax advantage. Based on leasing rates in my area, I should easily net $800/mo above our current mortgage payment, which of course includes taxes and insurance. My question is this: does my Adjusted Gross Income (AGI) have to be below $150k in order to also claim depreciation? And does that depreciation help you fall below the $150k threshold, or does it further reduce the AGI if your AGI is low enough? Since I will be essentially making money on this rental, I would really need the depreciation to offset my rental income, or I could find myself in a higher tax bracket, am I correct?

  64. can I take a mortgage on my rental property to buy a primary residence and still claim the interest

  65. can i borrow on my rental property to buy a primary residence and still claim the interest
    on the primary residence

    • Steve,

      To claim the interest deduction for your primary residence the mortgage must be on that home. IRS Pub. 936 has a more detailed explanation.

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