Do we treat mortgage payments on business property as a monthly expense or do we depreciate the entire mortgage as a capital expense?

Forum|Forum|7 years ago
June 3, 2019
5 replies
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dassi-sklanAuthor

Level 2

So, monthly business expenses: mortgage interest, property taxes and insurance. Depreciation is set on full-cost of building? -- what about the down payment and closing costs??

Zbucklyo

Level 8

Down payment is irrelevant, you should not depreciate the land value of the building. Some closing costs are deductible, but it depends on use of the building.

dassi-sklanAuthor

Level 2

This is not giving me enough information!  Cannot figure out how to call a live person anymore and the IRS number stops answering at 7pm.
Entire building is business, Bed and Breakfast. Bought in Nov 2017 for this purpose, first guest in Feb 2018.
What do you mean "down payment is irrelevant"?!  It must go somewhere -- business expense or startup?

Zbucklyo

Level 8

It is the capital for the investment and not reported anywhere on a tax return. It would be part of owner's equity for accounting purposes but not relevant for tax purposes.

I recommend you hire a tax professional to help you.

DavidD66

Level 15

You do not treat the mortgage payment as an expense. You set up the property as a business asset, and you deduct depreciation, mortgage interest, and property tax.

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