Mortgage interest on a rental property + income taxes (fed and state) = immediate candidate for itemizing, right?

[thisismetcalf]

Trying to understand if I easily benefit from itemizing versus standard deduction. Here's my main list:

1) $10K in mortgage interest

2) $15K in fed income taxes

3) $5K in state income taxes

4) $6K in property taxes

5) $5K in total out of pocket medical expenses not covered by ins

6) $2K in student loan interest

7) I also WFH, so I look for home-office deductions 

😎 I've done work to the rental property and also look for home improvement deductions 

This is a clear winner for itemizing, yes? My rental property serves as my home. I live there while renting out the upper unit (it's a duplex). I charge $1,100 for rent while the mortgage payment is $1,850. So there's that, too.

Appreciate any advice!

[PaulaM]

Answer depends on your filing status and other components of your return. You can always enter the data in TurboTax and the software will determine the best deduction for you. Below are some points to remember, as well as a link that gives a good overview of the new reform topics.

1. Mortgage interest would need to be allocated between your personal portion and the rental side. Your rental income would be reported on Sch. E and the portion of mortgage interest attributed to the unit also deducted there. Same thing for your property taxes.

2. Federal Income Taxes are not deductible

3 & 4. State income and property taxes are limited on the personal side to $10k. See the link

5.  Medical expenses would need to exceed 7.5% of your AGI

6.  You may be eligilbe to deduct up to $2500 in student loan interest, but it is not an itemized deduction on schedule A. It will go on the new Sch.1 and feed into your 1040.

7. This deduction is gone under Tax Reform. Misc. deductions have been suspended

8. If these are for the rental, expense/depreciate on the Sch. E. On personal side, improvements are just added to your basis.

So your items are best tested in the new tax environment within the software. See the overview link below.

2018 Tax Reform Overview

[thisismetcalf]

Thank you, Paula.

Ouch. Got beat up on what I thought would be slam dunks. I file as a single male. Do you feel I’m in line for a particular product? Perhaps Duluxe best suits me? Or are you saying I literally should just start filing and let the system tell me which is best?

[PaulaM]

If you have a rental property, you will need TurboTax Premier at minimum. You can upgrade as you go if your circumstances indicate that you should.

TurboTax Online products