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I AM AN OWNER OCCUPANT OF A MULTI FAMILY HOME. I RENT OUT ONE OF THE UNITS. HOW MUCH MORTGAGE INTEREST DO I DEDUCT ON SCHEDULE A AND HOW MUCH DO I DEDUCT ON SCHEDULE E

Forum|Forum|7 years ago
June 3, 2019
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SAME QUESTION FOR REAL ESTATE TAXES PAID

TurboTax Premier Online

Best answer by Anita01

You would usually determine the percentage by the size of the apartment vs the rest of the building. If there are 2 apartments, for example, and you rent one of them, you would use the square footage of that apartment as a percentage of the total building square footage. You would then apply that percentage to the the mortgage and interest.

Say the rented unit is only 10% of the building, you would allocate 10% of interest and tax to that unit, and the rest to Schedule A.

It's much simpler if all the units are the same size. For example if there are 2 apartments that are pretty much equal, you could just choose to allocate 1/2 of the interest and tax to that rented unit.

A

Anita01Answer

Employee

You would usually determine the percentage by the size of the apartment vs the rest of the building. If there are 2 apartments, for example, and you rent one of them, you would use the square footage of that apartment as a percentage of the total building square footage. You would then apply that percentage to the the mortgage and interest.

Say the rented unit is only 10% of the building, you would allocate 10% of interest and tax to that unit, and the rest to Schedule A.

It's much simpler if all the units are the same size. For example if there are 2 apartments that are pretty much equal, you could just choose to allocate 1/2 of the interest and tax to that rented unit.

R

racer914

Follow-up question - if you own and live in a 2 unit (equally sized) multi-family house, does that mean you MUST deduct 50% of mortgage interest and real estate taxes on Schedule A and the other 50% to Schedule E? If I wanted to deduct the full amount of mortgage interest on Schedule A, is that allowed?

Carl11_2

Employee

If I wanted to deduct the full amount of mortgage interest on Schedule A, is that allowed?

That makes no sense, since your SCH A itemized deductions do not kick in until they exceed your standard deduction. Then, only the portion that exceeds your standard deduction is of any help.For a married couple filing joint, it would take at least $25,200 of itemized deductions before anything over that would help. I don't know of very many joint tax returns that can achieve that each and every year.

Where as your SCH E deductions are 100% deductible, regardless.

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racer914

Thanks for replying. I file as single, so have the lower standard deduction, which I exceed each year. Unless I've misunderstood, I will get the mortgage interest deduction whether I take it as an itemized deduction on Schedule A or a reduction of income on Schedule E. My rental situation is perhaps unique in that all the expenses (if I include half of real estate taxes and half of mortgage interest) exceed the rental income. In which case, I may prefer to take the full mortgage interest deduction on Schedule A. But only if that's allowed of course.

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RobertB4444

@racer914 No, unfortunately you can't choose where to put that mortgage interest deduction. Since you have already exceeded the standard deduction then there is no difference to your bottom line between entering it on sch E or sch A UNLESS your income is high enough that you can't deduct a rental real estate loss. In which case moving it to schedule A makes sense. Which is why the IRS requires you to deduct it where you used it.

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