Can I claim credit card interest for purchases made for rental property upgrades?

[ghost · Accepted solution]

Yes.

"If you run a business of any size or own real estate that provides you with rental income, the interest paid on the charged expenses related to either activity is fully deductible. With a business, for example, it doesn't matter specifically what you buy, but whether it's an ordinary and necessary business expense. When you use a credit card exclusively for business-related charges, 100 percent of the interest is deductible. But if you use the card for both business and personal purposes, you can only deduct the interest that accrues on the business charges -- which means you may have to gather all of your credit card statements and separate the business charges from the personal ones when it's time to prepare your income tax return."

https://pocketsense.com/can-interest-paid-credit-cards-deducted-federal-income-tax-19227.html

[DeniseF1]

Yes. You can deduct it as an expense on Schedule E.  The "upgrade" is an improvement.  It is anything that increases the value of the property or extends its life is categorized as a “capital expense” or “improvement” and must be capitalized and depreciated over multiple years.

The general rule is that the cost or interest on “repairs” incurred to maintain your rental properties may be deducted.  Some repairs are considered “improvements” in which you’re not allowed to deduct the entire expense immediately.  

https://turbotax.intuit.com/tax-tips/rental-property/tax-deductions-for-rental-property-depreciation...> 

[Edited 1.17.18 | 12:51pm]

[MeMo]

Project Loan credit card from Home Depot used exclusively for improvements to Rental Property, interest paid cannot be claimed under expenses as “other interest” for the filing year the property is in service?

[DeniseF1]

My apologies. For clarification, YES, you can deduct the Credit Card interest as an expense on Schedule E.   The "upgrade" is an improvement if it adds value and must be depreciated overtime.

[karst4]

What happens if I sold the rental property in 2020 and am still paying interest on my credit card in 2021?  Can I still claim it?

[AmyC]

No, the IRS thinks if you sold the property, you paid off all associated loans. The fees do not come from any taxable income so they are not deductible.

@karst4