How does mortgage interest affect my taxes
Yes, it affects tax credits. And, unlike someone else stated, for tax purposes, you can probably show that you are NOT making any money. Keep in mind that. show more Yes, it affects tax credits. And, unlike someone else stated, for tax purposes, you can probably show that you are NOT making any money. Keep in mind that the portion of your mortgage pmt that goes toward principal does not count in that equation, only the interest. If your pmt also goes to escrow for insurance and taxes, then some of that will be deductible as well.
You file a Schedule E for rental property and other passive activities. I'm not a CPA, but I have had multiple rental properties and had to deal with these same issues. And I do have
a good CPA, which is worth any fee they charge. There are quite a few things you can deduct against rental income - mortgage interest, insurance, real estate taxes, any legal fees, management fees, phone calls related to the activity, postage, mileage. any overhead like cost of maintaining a separate bank account.
There is a limit on passive losses you can claim, especially if your Modified Adjusted Gross Income is over $100k, but you can carry those losses forward and claim them later if your income/salary drops.
Also, if you lived in this house as an owner-occupant and then rented it out, expect your real estate taxes to go up because many areas give a tax credit for homeowners. That tax increase can be significant, so be wary of that.Source: uk.answers.yahoo.com