Real estate mortgage and taxes

Member since 2018 · 20 posts · 12 votes

I have my rental real estate principal and interest mortgage payments going out of my LLC bank account. I believe only interest and real estate property taxes are tax deductible. How do I account for mortgage payments in my P&L reporting for my LLC? Do accounting software like Quicken automatically take care of this or do I need to do something different to handle this correctly?

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Ashish AcharyaBusiness Member

CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes

Originally posted by @Wilson Pereira:

your book income statement and tax statement is going to be different.

You can reclassify your principle portion to mortgage balance. Credit mortgage payment and debit mortgage payable. That is one way to do it. There are many other ways to handle this depending on how you want to see your books.

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Simon W.Business Member
Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 657 votes
5y
@Wilson Pereira I don't use Quicken, but when you entered it, what does the P&L look like?
Yes, you are correct that only the interest expense and property taxes are deductible.
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
5y
Originally posted by @Wilson Pereira:
I have my rental real estate principal and interest mortgage payments going out of my LLC bank account. I believe only interest and real estate property taxes are tax deductible. How do I account for mortgage payments in my P&L reporting for my LLC? Do accounting software like Quicken automatically take care of this or do I need to do something different to handle this correctly?

your book income statement and tax statement is going to be different.
You can reclassify your principle portion to mortgage balance. Credit mortgage payment and debit mortgage payable. That is one way to do it. There are many other ways to handle this depending on how you want to see your books.

[email protected]941-914-7779
INVESTOR FRIENDLY CPA®5241 Reviews
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TaxMD™ | AI-Powered Tax Planning
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Bill HamptonBusiness Member
Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 977 votes
5y
Wilson,
Check out stessa dot com. Its a free expense tracking software designed for real estate investors.
Good luck.
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Wilson Pereira
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Member since 2018 · 20 posts · 12 votes
5y
Originally posted by @Simon W.:
@Wilson Pereira I don't use Quicken, but when you entered it, what does the P&L look like?
Yes, you are correct that only the interest expense and property taxes are deductible.

The P&L includes mortgage payments as expense but as you pointed out only interest and property taxes are deductible. Mortgage payments also include escrow that goes towards property taxes and insurance which are deductible. Basically there is an additional principal amount in there that somehow needs to be offsetted or handled differently in the P&L.

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Wilson Pereira
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Member since 2018 · 20 posts · 12 votes
5y
Originally posted by @Bill Hampton:
Wilson,
Check out stessa dot com. Its a free expense tracking software designed for real estate investors.
Good luck.

Thank you Bill.. I will check Stessa dot com out.
Do you know if Stessa dot com handles mortgage payments P&L correctly for tax reporting?

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Carl Miller
Attorney · Littleton, CO · Member since 2015 · 28 posts · 13 votes
5y
I second @Ashish Acharya. I don't know how many clients I've had come in with a sizeable loss only find out that the mortgage repayment is supposed to be a balance sheet entry and not on the P&L. You should have an amortization schedule in your loan paperwork that shows the portion of the monthly payment that is for loan repayment. If not, you can make an amortization schedule in your favorite spreadsheet software and that will get you pretty close the number for monthly loan repayment. If you make additional mortgage payments, that's going to mess with the original amortization schedule so you may want to make your own schedule anyway.
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Simon W.Business Member
Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 657 votes
5y
Originally posted by @Carl Miller:
I second @Ashish Acharya. I don't know how many clients I've had come in with a sizeable loss only find out that the mortgage repayment is supposed to be a balance sheet entry and not on the P&L. You should have an amortization schedule in your loan paperwork that shows the portion of the monthly payment that is for loan repayment. If not, you can make an amortization schedule in your favorite spreadsheet software and that will get you pretty close the number for monthly loan repayment. If you make additional mortgage payments, that's going to mess with the original amortization schedule so you may want to make your own schedule anyway.

It's true. I don't know why people want to do the accounting on their own. Eventually have to hire someone else down the line and cost more to "fix" the books.
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