How do I calculate the Mortgage Interest on a Rental Property?
I chose to rent my place out that I was living in to someone in October, 2006. When I calculate the Mortgage Appeal for the leasing do I just calculate the appeal paid during October through December of 2006 since those are the months I rented the property out?
All the appeal is deductible, but the leasing appeal gets deducted on the business deprivation form even as the rest gets deducted on Schedule A. The business deprivation form also gets any maintenance, utility, insurance, and property tax deprivation, all of which need to be suitably apportioned. The residential part of the property tax is a Schedule A deduction.
Mortgage appeal for the first 9 mos. gets reported on Schedule A “Itemized Deductions.” The appeal for the last 3 mos. gets reported on Schedule E for leasing activities. You would also report your leasing income and any expenses you incurred, i.e. repairs, maintenance, taxes, insurance, etc. Obviously only a part (25%) of some expenses would be deductible since you only rented out the home for 25% of the year.
Don’t forget that you can also take a depreciation deduction now since you’ve converted the property to leasing property. Your basis would be the lesser of its honest market value or its adjusted cost basis on the date of change. You depreciate the property over 27.5 yrs. using either MACRS or the straight-line method.
Kind of.
What you do is calculate an “title-holder full percentage”. The time you rented it out was 3 months. Apportion 3 months out of 12 months which equals,
25%. Show 75% as the title-holder full percentage.
Tax programs will allocate 75% of the mortgage appeal and real estate taxes
to Schedule A and 25% to Schedule E.