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michaelw44444
New Member

I bought 3 investment properties this year. Can I write off their mortgage interest on my main income taxes like my primary residence?or just rental property income?

 
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Hal_Al
Level 15

I bought 3 investment properties this year. Can I write off their mortgage interest on my main income taxes like my primary residence?or just rental property income?

Yes, but not exactly. If it is rental property, that has been "placed in service", mortgage interest is deducted on schedule E with other rental expenses.

Otherwise, mortgage interest on unproductive investment property is only deductible to the extent of other investment income but is not subject to the 2% of AGI rule. It can be capitalized. (http://www.nolo.com/legal-encyclopedia/tax-deductions-vacant-lands.html)

The carrying costs (e.g. insurance & utilities) of investment property are deductible as investment expenses, but are subject to being a misc. itemized deduction also subject to the 2% of AGI threshold. Real estate (property) tax may be deducted on schedule  A, under taxes, without regard to the 2% rule.
Alternatively, taxpayers can elect to capitalize (add it to your cost basis)  the carrying costs of unimproved and nonproductive real property, real property under development or construction and personal property before its installation or use (Regs. Sec. 1.266-1(b)(1)).  The election is made with the tax return by its due date, including extension, by attaching a statement. You cannot wait until you sell the property, but must make that election each year. Attach the statement to the return and write “Filed pursuant to section 301.9100-2” on the statement. 



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1 Reply
Hal_Al
Level 15

I bought 3 investment properties this year. Can I write off their mortgage interest on my main income taxes like my primary residence?or just rental property income?

Yes, but not exactly. If it is rental property, that has been "placed in service", mortgage interest is deducted on schedule E with other rental expenses.

Otherwise, mortgage interest on unproductive investment property is only deductible to the extent of other investment income but is not subject to the 2% of AGI rule. It can be capitalized. (http://www.nolo.com/legal-encyclopedia/tax-deductions-vacant-lands.html)

The carrying costs (e.g. insurance & utilities) of investment property are deductible as investment expenses, but are subject to being a misc. itemized deduction also subject to the 2% of AGI threshold. Real estate (property) tax may be deducted on schedule  A, under taxes, without regard to the 2% rule.
Alternatively, taxpayers can elect to capitalize (add it to your cost basis)  the carrying costs of unimproved and nonproductive real property, real property under development or construction and personal property before its installation or use (Regs. Sec. 1.266-1(b)(1)).  The election is made with the tax return by its due date, including extension, by attaching a statement. You cannot wait until you sell the property, but must make that election each year. Attach the statement to the return and write “Filed pursuant to section 301.9100-2” on the statement. 



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