How to split 1098 between rental properties

I bought rental properties B and C using the proceeds from a mortgage on rental property A. The tracing rules state that I need to report the interest on Schedule E based on how the proceeds of the mortgage were used (so I would report the interest as being used for properties B and C since that was how the funds were used). What is the best way to do this? Would I report the interest on the 1098 for property A as 2 1098s for properties B and C (or would I state that the interest I'm claiming on Properties B and C did not appear on a 1098)? Thank you in advance for your response.

564

Expert Alumni

Mar 26, 2023 12:39:06 PM

Do NOT enter the 1098, only enter the portion of interest for each as an expenses.

Since the loan is not secured by either rental, and was not used for your main home, the interest is only a rental expense and not Home Mortgage Interest.

A 1098 is only required to claim Home Mortgage Interest.

In your situation, entering the 1098 could cause confusing for the program.

Allocate the interest proportionately to the rentals.

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How to split 1098 between rental properties