Investor · White Haven PA · Member since 2014 · 363 posts · 221 votes
What a basic question. I'm doing 2015 taxes before the deadline.
Purchased a flip in 2015 and got a hard money loan and sold it in 2016.
Since it wasn't sold until 2016 it's not reported on 2015 tax filings. My question is would the interest paid to the HML in 2015 be deducted in 2015? or would it be deducted in 2016 when the house was sold?
Costs incurred and paid in any specific years are deducted that year. If you paid interest in two years, you would deduct that amount paid in each year. The profit would be reported in the year in which you earned it. 2015 interest paid would be deducted in 2015. 2016 interest paid would be deducted on 2016 taxes. We are nearing year end and I am in the process of paying as many bills, buying supplies, etc to be able to expense them this year. Buy supplies on Dec 31, 2016 and deduct those on 2016 taxes.