Can I Deduct Mortgage Interest from IRS Pub. 936 Line 16 for Rental Expenses?

[Raul2025]

I’m trying to determine whether I can deduct the mortgage interest listed in Line 16 of IRS Publication 936 as a rental expense for rooms I rent out in my primary and secondary residences.

My Situation (Example Numbers):

• I own two properties with mortgages:

  • Condo (previous primary residence, now 50% used as my home office for 1099 work and 50% rented).

  • Single-family home (new primary residence, 50% personal use, 50% rented rooms).

• My combined mortgage balance in 2024 was $1,300,000 ($550K condo + $750K single-family home), which exceeds the $750K mortgage interest deduction limit.

• Following IRS Publication 936 calculations, my mortgage interest deduction limit is 57.69% (Line 14).

• My total mortgage interest paid in 2024 was $54,000 ($18K condo + $36K single-family home).

• My deductible mortgage interest (from IRS Pub. 936, Line 10 multiplied by 57.69%) is $31,152, which I plan to split between Schedule E (rental portion) and Schedule A (personal portion).

My Question:

The remaining mortgage interest shown in IRS Pub. 936, Line 16 is $22,848 ($54,000 - $31,152). The publication states this is personal interest unless used for business, investment, or other deductible activities, citing "deductible interest incurred to produce rents or royalties" as an example (Pub. 936, Table 2).

Since I am renting rooms in both properties, can I deduct some or all of this remaining $22,848 as a rental expense on Schedule E? If so, how should I enter this in TurboTax?

Note: The numbers provided are for example purposes only and do not reflect my actual mortgage balances or interest payments.

Any guidance would be greatly appreciated!

[PatriciaV]

Yes. The excess mortgage interest may be reported on the rental properties, as long as the amount represents no more than the percentage of the residence that is rented.

Example 2: Kimi owns a duplex with a balance of $1,200,000 and rents out 50% of it. Kimi would not have any interest limit and would need to manually input a 1098 with half of the values stated. The other half of the interest would be deducted in the rental expense topic.

 If you have calculated a different amount using the instructions from IRS Pub 936 Part II, Limits on Home Mortgage Interest Deduction, you may enter this during the interview for Form 1098.

Click Done at the bottom of the 1098 Summary list and answer all questions until you come to the page "Your Mortgage Interest is limited." TurboTax provides a box on this page where can enter the deductible interest based on your calculations. No other overrides are necessary. Be sure to save your calculations with your other tax paperwork.

For your rental properties: After you enter the mortgage interest expense, you may see a screen indicating that the remaining portion of the mortgage interest, i.e., the mortgage interest that applies to your personal residence, will be transferred to Schedule A.  However, double check that entry to confirm the amount is what you calculated.  If it does not, you will need to manually adjust the amount.