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Level 1
June 20, 2020
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Trying to understand why with rental income there is no question regarding your mortgage as a deductible. Shouldn't what's paid as your mortgage be counted as an expense?

  • June 20, 2020
  • 3 replies
  • 45 views
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Best answer by Critter

The mortgage payment is divided into interest and principal paid.  The interest portion is a deduction and the principal is handled thru depreciating it as required ... this is in the asset section. 

3 replies

Level 10
June 20, 2020

Sort of. Only the interest portion is deductible. (If it is a multi-family and you live in it, obviously only the rental portion is deducted on Schedule E, the rest would be a personal expense on Schedule A).

 

Principal payments are not an expense that reduces your net worth. They just move value from your checking account into the equity of your property.

 

This prior question explains where to enter the interest. (Basically there is an input screen for it just after the other expenses are entered

 

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/where-to-enter-mortgage-interest-deductions-for-rentals-1-income-section-gt-rental-income-gt/01/741353

 

 

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Critter
CritterAnswer
Level 15
June 20, 2020

The mortgage payment is divided into interest and principal paid.  The interest portion is a deduction and the principal is handled thru depreciating it as required ... this is in the asset section. 

Carl
Level 11
Level 11
June 21, 2020

The entire mortgage payment is never deductible under any circumstances. There are no exceptions. Only the interest you paid on the mortgage in the tax year is deductible. That interest is reported to you by the lender on IRS Form 1098-Mortgage Interest Statement. The program does specifically ask if you have a 1098. If you indicate that you do, then you are asked to enter the data from the 1098. In addition to mortgage interest on that 1098, if PMI is reported on it, you can deduct that also and the program will ask if you have paid PMI. (Sometimes referred to as MIP on a VA type loan.)

In the year you purchased or refinanced the property, the 1098 might also show points paid, and there's a selection for that in the program also. Just be careful with points, because it's not uncommon for points reported on the closing statement to be duplicated on or included with the amount reported on the 1098. Double-dipping will come back to bite you.