J Silva asked:


I understand that if the owner lives in a four family house, 25% of the interest is shown as a deduction on Schedule A and 75% is shown as an expense on Schedule E.

However, exactly how does this benefit the owner? Lets assume the owner paid $500 over the course of the year in taxes and paid $100 in mortgage insurance.

Thanks!!

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One Response to “What are the calculations to show the tax benefit of mortage interest deductions for a rental-property buyer?”

1. bostonianinmo on September 1st, 2008 1:24 pm

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   The mortgage interest and property tax reduces your taxable income. The portion on the Schedule A might help if your itemized deductions are greater than your standard deduction. Apportion the real estate taxes the same way. The portion on Schedule E will offset the rental income and therefore reduce your taxable income.

   The mortgage insurance isn’t deductible so the portion attributable to your personal residence doesn’t go on Schedule A. The portion attributable to the rental units should be deductible on Schedule E.

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