How is mortgage interest taxed?

I bought a property last May intending to fix and flip in 3 - 6 months. I am now going to rent the property for the next year or two. How is the mortgage interest deducted? I assume all repairs will be added to the cost basis, but do I deduct mortgage interest from my personal income as I go along from year to year?


If it is an income property, you will need to file a 1040, Schedule E. Mortgage interest on the property is reported on Line 12.

Repairs are “repairs” and are reported on Line 14 and taken in the year that they are made, not added to the cost basis. I recommend that you have a look at the Schedule E and understand all of the deductions that you are allowed, including the Depreciation.

If you have an overall “loss” (i.e., a negative number on Line 26), you may be able to deduct the amount from your active income (salary, etc.) provided you meet the IRS thresholds…

DISCLAIMER: I am not a qualified tax professional, CPA, or lawyer nor do I play one on TV…your mileage may vary according to your individual driving habits.


keith’s disclaimer says it all - talk to your CPA - if you don’t have one get one.