Mortgage interest write off on investment property

[Phil Baker]

I’ve been struggling to get the right answer in writing off investment property interest. I thought investment property mortgage interest was tax deductible. My tax guy is telling me it is not. Does anyone have any information or resources they could share with me?

[Michael Plaks]

@Phil Baker

If your tax guy really says that mortgage interest on investment properties is not deductible, you need a new tax guy. However, I doubt that this is what he said. More likely that he said something along the lines of "mortgage interest does not make a difference on your taxes" - which is possible in some situations. Or maybe something else entirely.

Mortgage interest on your personal home is deductible as a personal itemized deduction on Schedule A of your tax return. For a lot of people, it does not make a cent of a difference because they benefit more from taking a standard deduction. Have your tax guy explain this to you.

If by investment properties you mean a vacant piece of land, it would go in the same place.

Mortgage interest on your rental properties is deductible as a business deduction on Schedule E of your tax return. Depending on your other numbers, it can create a loss, however such a loss is sometimes restricted, and you cannot benefit from it in the current year. The loss is then pushed into the future. Indirectly, it can be interpreted as your mortgage interest being "not deductible", albeit it's a bad way to describe it.

Maybe something else is going on. Or, sadly, maybe your tax guy is not experienced.