Tax’s vs Equity - would it hurt to much?

[Renee Lee]

My questions stem from velocity banking...



1. I know there is a tax deduction for writing off the interest on an investment property is it dollar for dollar?

2. Let’s say, an investment property has a mortgage and the landlord was to throw an Extra $20,000 at the principal. Extra $20 hit the Mortgage principal in 2019, in year 2020 do nothing but make the required payments to the bank. In 2020 - assuming the tax code did not change when the landlord be entitled to write off the interest? In 2019 with the extra money the landlord shows a gain and would not be allowed to do so correct? 

[Natalie Kolodij]

Your mortgage interest is a tax deduction not a tax credit. 

This means that each dollar of qualified mortgage interest you pay in a year, you are allowed to deduct against your income on the property. 

It will not result in a dollar for dollar tax reduction as a credit would. It reduces how much income is taxed, not dollar for dollar how much tax there is after that calculation. 

Typically, if you're making accelerated payments most people are trying to apply against principle, so no additional mortgage interest paid.