Mortgage interest write off on investment property

Santaquin, UT · Member since 2015 · 18 posts · 2 votes

I’ve been struggling to get the right answer in writing off investment property interest. I thought investment property mortgage interest was tax deductible. My tax guy is telling me it is not. Does anyone have any information or resources they could share with me?

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Michael PlaksPro Member

Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes

@Phil Baker

If your tax guy really says that mortgage interest on investment properties is not deductible, you need a new tax guy. However, I doubt that this is what he said. More likely that he said something along the lines of "mortgage interest does not make a difference on your taxes" - which is possible in some situations. Or maybe something else entirely.

Mortgage interest on your personal home is deductible as a personal itemized deduction on Schedule A of your tax return. For a lot of people, it does not make a cent of a difference because they benefit more from taking a standard deduction. Have your tax guy explain this to you.

If by investment properties you mean a vacant piece of land, it would go in the same place.

Mortgage interest on your rental properties is deductible as a business deduction on Schedule E of your tax return. Depending on your other numbers, it can create a loss, however such a loss is sometimes restricted, and you cannot benefit from it in the current year. The loss is then pushed into the future. Indirectly, it can be interpreted as your mortgage interest being "not deductible", albeit it's a bad way to describe it.

Maybe something else is going on. Or, sadly, maybe your tax guy is not experienced.

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Nathan A.
New to Real Estate · Sunnyvale CA and Maplewood, NJ · Member since 2022 · 257 posts · 161 votes
3y
You don't treat it as a direct deduction against your personal W-2 income like you would mortgage interest for a primary residence. You treat it as one of the expenses you deduct against the property's income to calculate (for tax purposes, including depreciation) whether the property has operated at a profit or loss. Here's an official source.
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Ash Hegde
Lender · Fort Lauderdale, FL (Lending in FL CT GA MI PA) · Member since 2022 · 470 posts · 349 votes
3y
Agree with Nathan. It's possible that your rental has a tax loss and you are running into a passive loss limitation, maybe that's what your CPA meant.
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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
3y
@Phil Baker

If your tax guy really says that mortgage interest on investment properties is not deductible, you need a new tax guy. However, I doubt that this is what he said. More likely that he said something along the lines of "mortgage interest does not make a difference on your taxes" - which is possible in some situations. Or maybe something else entirely.

Mortgage interest on your personal home is deductible as a personal itemized deduction on Schedule A of your tax return. For a lot of people, it does not make a cent of a difference because they benefit more from taking a standard deduction. Have your tax guy explain this to you.

If by investment properties you mean a vacant piece of land, it would go in the same place.

Mortgage interest on your rental properties is deductible as a business deduction on Schedule E of your tax return. Depending on your other numbers, it can create a loss, however such a loss is sometimes restricted, and you cannot benefit from it in the current year. The loss is then pushed into the future. Indirectly, it can be interpreted as your mortgage interest being "not deductible", albeit it's a bad way to describe it.

Maybe something else is going on. Or, sadly, maybe your tax guy is not experienced.
2 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
3y
@Phil Baker
It’s deductible for your rental. If he says otherwise, then find someone else. I do mine on my own with turbo tax. It’s definitely not rocket science to do.
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Frank Greg
Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
3y
@Phil Baker:

I’ve been struggling to get the right answer in writing off investment property interest. I thought investment property mortgage interest was tax deductible. My tax guy is telling me it is not. Does anyone have any information or resources they could share with me?

There is 'investment interest' and 'personal interest'. Interest that accrued on an investment property mortgage can be deducted as investment interest expense not as personal.

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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
3y
If your tax professional say something is not tax-deductible.
Your follow-up question should be 'how can I make it deductible"(if possible)

Deductibility of mortgage interest on an investment property that is very basic and should be known by 95%+ of tax professionals

[email protected]917-280-8544
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Phil Baker
OP
Santaquin, UT · Member since 2015 · 18 posts · 2 votes
3y
@Phil Baker
Thank you all! Sounds like it is, just in a different more complex way and maybe not all the time. I appreciate all the responses.
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