Real Estate Question: Deducting Interest on a Mortgage
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Real Estate Question: Deducting Interest on a Mortgage
Hi all,
I'm about to purchase a second home with a good buddy of mine for investment purposes. Normally, you deduct the interest on the mortgage on when reporting taxes. My question is how does that work when two people are on the deed from which both file separately? Common sense would think you would just split the interest in half, and that's what you can deduct. Does anyone know how this works?
I'm about to purchase a second home with a good buddy of mine for investment purposes. Normally, you deduct the interest on the mortgage on when reporting taxes. My question is how does that work when two people are on the deed from which both file separately? Common sense would think you would just split the interest in half, and that's what you can deduct. Does anyone know how this works?
#3
Team Owner
Originally Posted by airjam21
I'm about to purchase a second home with a good buddy of mine for investment purposes.
Also, get your own accountant.
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I'm definitely gonna have to get an accountant. I just moved out here within the last year and haven't found a decent one yet. Good call on it possibly ruining a friendship. I've heard horror stories about similar situations, but I have this deal on lock though.
#5
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Originally Posted by airjam21
Good call on it possibly ruining a friendship. I've heard horror stories about similar situations, but I have this deal on lock though.
This may be useful should a tax agency audit occur as well.
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I think the way it works is that you can deduct the interest against the income the property generates. You can deduct the interest against your income only on your primary residence.
As far as the deed, you can either be tenants in income (equal or unequal ownership; your will decides who gets your share upon death) or joint tenants (equal shares; upon death, the property goes to the other owner(s)).
As far as the deed, you can either be tenants in income (equal or unequal ownership; your will decides who gets your share upon death) or joint tenants (equal shares; upon death, the property goes to the other owner(s)).
#7
Drifting
For investment properties, you can deduct many things including mortgage interest and property taxes as well. You do this by filling out an IRS Schedule E form. Make sure that both you and your partner each write checks (or have auto payments) for 1/2 the expenses so you have a paper trail in case you have an audit. The big ones are mortgage and property taxes in addition to any maintenance or management expenses (HOA, gardner, etc)
You'll want to keep good records of things in general. I found that I needed to increase my cell phone plan to cover more calls from tenants and even this increase is deductible.
You'll want to keep good records of things in general. I found that I needed to increase my cell phone plan to cover more calls from tenants and even this increase is deductible.
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