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I've tried to contact the IRS regarding this. On Schedule E…

Hi Pearl, I've tried...

Hi Pearl, I've tried to contact the IRS regarding this. On Schedule E (rental property) I have a mortgage on the rental property, am I able to deduct the mortgage payments I make to the bank on line 19 (Other)?

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

Not that I can think of, no

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3/16/2018
bkb1956
bkb1956, Finance Enthusiast
Category: Finance
Satisfied Customers: 5,801
Experience: IRS Enrolled Agent, 20+ years of experience in tax preparation with associated finance experience.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

You can deduct the mortgage INTEREST on Line 12 of Schedule E. Your statement from the bank should include the interest payments you made for 2017.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 1 month ago
Hello Barbara, my question is not regarding the mortgage interest. My question is, I currently have a mortgage on my rental property; every month I pay the bank my mortgage payment for my rental property. I see this as an 'expense'. Am I able to deduct the mortgage payment on Schedule E?

You can ONLY deduct the mortgage interest portion of your mortgage payment on Schedule E.

For example, if your total mortgage payment is $1000/month, but $800 of it is interest, you can deduct the $800.

Make sense?

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Customer reply replied 1 month ago
that makes sense. So the answer is no, I cannot deduct the mortgage payments I make, but rather the interest that I pay on the mortgage during the year which is reported on my Form 1098. Is that correct?

That's right.

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Customer reply replied 1 month ago
Thank you! My final question is also regarding mortgage loans. I refinance my main home loan. On schedule A (line 12) am I able to deduct my loan origination fees? I do have a Form 1098 which reports the points I paid on the loan, but other than my closing documents, I do not have any other form which states the origination loan fees I paid.

From the IRS,

You can deduct the points in full in the year you pay them, if you meet all the following requirements:

  1. Your main home secures your loan (your main home is the one you live in most of the time).
  2. Paying points is an established business practice in the area where the loan was made.
  3. The points paid weren't more than the amount generally charged in that area.
  4. You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them.
  5. The points paid weren't for items that are usually listed separately on the settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.
  6. The funds you provided at or before closing, including any points the seller paid, were at least as much as the points charged. You can't have borrowed the funds from your lender or mortgage broker in order to pay the points.
  7. You use your loan to buy or build your main home.
  8. The points were computed as a percentage of the principal amount of the mortgage, and
  9. The amount shows clearly as points on your settlement statement.

You can also fully deduct (in the year paid) points paid on a loan to improve your main home if you meet tests one through six above. Points that don't meet these requirements may be deducted ratably over the life of the loan. You can deduct points paid for refinancing generally only over the life of the new mortgage. However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six requirements stated above, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. You can deduct the rest of the points over the life of the loan. Points charged for specific services, such as preparation costs for a mortgage note, appraisal fees, or notary fees aren't interest and can't be deducted. Points paid by the seller of a home can't be deducted as interest on the seller's return, but they're a selling expense that will reduce the amount of gain realized. The buyer may deduct points paid by the seller, provided the buyer subtracts the amount from the basis or cost of the residence. You can only deduct points you pay on loans secured by your second home over the life of the loan.

https://www.irs.gov/taxtopics/tc504

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Customer reply replied 1 month ago
I too found that language on the IRS' website. I do meet all the requirements outlined regarding points, including point 5. Being that these fees are not reported on Form 1098, am I able to note these fees on Schedule A, Line 12?

If the points were not reported on Form 1098, you deduct them on Line 12 of Schedule A.

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Customer reply replied 1 month ago
Thank you

My pleasure.

My goal is to provide you with excellent service. Please take a moment to rate my answer with a 5-star rating to let me know that I have achieved my goal.

bkb1956
bkb1956, Finance Enthusiast
Category: Finance
Satisfied Customers: 5,801
Experience: IRS Enrolled Agent, 20+ years of experience in tax preparation with associated finance experience.
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