I took out a mortgage on my primary home to buy rental property, how do I handle this?

[bookworm62]

It is actually more complicated. In May of 2015 we bought a non-financeable rental property by mortgaging our home.  In August of 2016 we purchased another rental with a line of credit against our home. Also in August of 2016 we refinanced, rolling both into a single mortgage. What are the steps to properly allocate the expenses to each rental? I previously claimed it as a schedule A  deduction, but just learned that technically it is not.

[MarilynG · Accepted solution]

You would enter your rental properties in the Rental section of Wages & Income.  When you enter the 'cost basis' for the rental property, you can enter what you paid for it as well as any refinancing costs involved.  

You then claim mortgage interest, property taxes, insurance, etc. as rental expenses against the rental income.  If you refinance a rental property later, you can enter those costs as a depreciable asset in the Rental section also.

You could split the refinancing costs of combining the mortgages on the rental properties 50/50 or however you determine proper.  For example, for 100K refinance, 75K paid off the mortgage for Rental 1 and 25K paid off mortgage on Rental 2.

Here's more info to help you:

https://ttlc.intuit.com/replies/3301761

[ptafzil]

How do you allocate the mortgage interest expense to ea rental?