Mortgage Interest Deduction

[Once a year Accountant]

Mortgage Interest - Rental vs Personal

Hello Turbo Tax Community:

FYI:  My mortgage Interest is ~ $7000

I am hoping someone can answer this question.  My taxes are relatively simple, I own a 2-family home and I live in one of the units and rent out the other unit.  I have been using TurboTax or years and I have always entered my Mortgage Interest in the Income section “Rental Properties and Royalties Section”  of Turbo Tax. 

I usually just use 50% of all expenses so Turbo -Tax automatically assigns what goes towards the “Personal” side of things.  When I enter my total Mortgage Interest here (Rental Properties an Royalties section) you are NOT SUPPOSED to enter any 1098 information in the Personal deduction section of Turbo Tax. 

So just for hell of it this year I did an experiment and did my taxes two ways 1) like I always have (discussed above) and 2) I did not ENTER any mortgage interest in the Rental and Royalties section and entered it all in the Personal Deduction section.

Doing my Taxes by entering my mortgage Interest in the Rental and Royalties section (using the 50% split) my expected Return is $950

When I enter all my mortgage interest in the Personal Deduction Section my expected return is $1500.

In both instances when I look at the completed Return PDF of my Return the Itemized Deductions worksheet has $7000 for Mortgage Interest.

Why is there such a big difference in my expected refund ?

 Is it because when you enter it in the Rental and Royalties section it only deducts the $3500 of my personal deduction for this year and the $3500 for the Rental is at a Depreciation Level ? 

I hate to think that I have been over paying taxes all these years. 

[Cynthiad66]

Your Mortgage interest should appear as 50% on Schedule A itemized deductions and 50% on Schedule E rental property. 

Now, when you enter the entire amount of your mortgage as an itemized deduction it does not automatically carry the 50% to the Rental Schedule nor does it reduce the amount to 50%.  However, when you properly show the percentage in the rental schedule, if you show the full amount the schedule should only apply the 50% as a deduction for Schedule E plus carry the other half to Schedule A.

If you need to correct prior years you can amend  using TurboTax.  Some TurboTax customers and access to up to the prior seven years of tax returns we have on file for you is available through 12/31/2024.  You typically must file an amended return within three years from the original filing deadline, or within two years of paying the tax due for that year, if that date is later.

If you are amending more than one tax return, prepare a Form 1040X for each year's return.  Sign and mail them to the IRS in separate envelopes. You will find the appropriate IRS address to mail your return to in the Form 1040X instructions.

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