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When the loan/mortgage was taken - it was not reported as your taxable income - correct?So when that mortgage is paid off - that amount is NOT deducted.
The sale of rental property is reported on form 4797The gain is calculated as (selling price) MINIS (adjusted basis) MINUS (selling expenses)That gain will be added to other taxable income - but if you owned that rental property more than a year - the gain will be taxed as long term capital gain at reduced tax rates.
We still may deduct mortgage interest - that amount is reported on schedule E with other rental expenses.
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