Where do I enter earned interest on my escrow account for a rental property mortgage?

[BobinCT · Accepted solution]

Just like interest income on a savings account.  Enter it as though it was on a regular 1099-INT

[jh777]

I don't think this has been solved correctly.  The interest generated is for a rental, not just interest earned in a bank account.  The interest gained should reduce the expenses incurred on the property or increase the amount earned on the property.

However, TT does not appear to have an obvious means to make such an adjustment in the rental section.

So, I too would like to know the proper solution.   I wonder if I can put in a negative expense or add it something  like a 1099-MISC but it needs to be applied to the property.

[MarilynG1]

Since interest is not 'Rental Income' it is not reported on Schedule E. 

Click this link for more info on Interest Income for Rental Property.

[whodiini]

But since I qualify for QBI, I should be able to allocate interest income to the rental!   So where in schdeule E do I put it?

[Critter-3]

Explain " interest earned on escrow account"  ... what do you mean exactly?  

Are you the landlord that has an escrow account holding things paid in by the tenents like the security deposit? 

Or are you holding the mortgage on a rental property? 

[whodiini]

See the excellent answer in this thread:

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/re-since-your-rental-...

[NCperson]

@Critter-3 - some states require mortgage servicers to pay interest on the escrow they are holding for taxes and insurance.  that is what the OP is refering to. 

[Critter-3]

Ok ... that makes sense however that interest actually belongs to the property owner making the escrow payment correct?   And that should be passed thru to them right?  

Do Mortgage Escrow Accounts Earn Interest? (investopedia.com)

Who gets the interest earned on money held in escrow?

State law may determine who gets the interest earned on money in escrow. In California, for instance, homeowners who make mortgage or property tax payments through an escrow account are entitled to the interest earned on that money. Not all states have these types of rules, and it may depend on the bank involved.

Types of Escrow Accounts: Keep Money Safe (thebalancemoney.com)

[NCperson]

@Critter-3 correct. the interest is either passed to the borrower (normally the property owner) in cash or more likely simply credited to the escrow balance.  I would imagine if the credit exceeds $10, a 1099-INT must be issued. 

[Jerry Lantzy]

The application of 1009-Int from the deposits held in escrow accounts for the payment of Property taxes and  Insurance is further complicated when a property partnership/ownership interest is present and TT is used to automatically split revenues and expenses by entering the property ownership percentage.  In this circumstance, would it be better to have the partner whose "Recipient's TIN" (SS#) is on the 1099 report the Interest, rather than the possibility raising additional questions by splitting/submitting partial 1099-Ints under ordinary income?  

[ThomasM125]

It may be easier to have the partner enter the interest income on his or her personal tax return. However, you are not supposed to enter income that doesn't belong to you on your tax return. In some instances an increase in income can actually lower your tax, as can happen with an earned income credit is some circumstances. It can have unintended consequences. It would be better from a compliance standpoint to allocate the income to each partner as is required by the tax regulations. @Jerry Lantzy