claim interest paid on loan from 401k on tax reports?

Question

I searched the forums but could not find this exact question.

I borrowed from my 401k to use as a down payment on a rental property and now pay that back monthly with interest. I believe for 2017 anyway, I can claim that interest paid as an expense on the rental, right? Just include it on Schedule E along with the mortgage interest amount? Or as some other interest? But from what I understand interest amounts claimed will be limited for 2018 forward, right?

Basit Siddiqi · Answer

The great thing about this is that you are eligible for a deduction while your retirement account is increasing in size.
You are not required to report interest income on your return because the interest is earned by your retirement account - not you.

Michael Plaks · Answer

@Don Spafford

Use Sch E, line 13 "other interest" instead of line 12 "mortgage interest."

There're no changes for 2018. The tax reform limited interest deductions for personal properties, not investment properties.

Don Spafford · Answer

@Basit Siddiqi Very excellent point! Thanks for your input.

@Michael Plaks Very much appreciated! Thanks for clarifying on where to include that as well as explaining the tax code changes for interest deductions.

George Blower · Answer

Correct that 401k participant loan payments are not tax deductible and must be paid with after-tax funds.

Nate Callard · Answer

I think these guys are misunderstanding your question. You cannot deduct the interest on your 401k loan as an expense of your rental.

claim interest paid on loan from 401k on tax reports?

claim interest paid on loan from 401k on tax reports?

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