Rental property and mortgage payments

I have a rental property and am trying to do my tax return for this year. I charge $1200/month in rent. Here are my calculations: Total rental income received ($1200 x 12): 14400 ($1200 x 12)

Minus Expenses: Mortgage interest: 6804 Insurance: 655 Miscellaneous repairs: 296 Real estate taxes: 1287 Total: 9042

Minus Depreciation: House: 1241 Total: 1241

Net rental income for rental: 4117

What I am wondering is how can this be considered income when I still have to pay the mortgage payments on the property? The $4117 is not money in my pocket. The monthly mortgage payment is $900 so I see where I have a positive income of $300/month, but what about the fact that I also have to pay for the mortgage payments. Why can't I call that an expense to be deducted from the rental income? I am also assuming that when I am asked the question (since I am using Turbo Tax) about any mortgages that I may have, I can't use the mortgage from the rental property on my personal itemized list of deductions since I have already expensed the interest and taxes on the schedule E. Or am I mistaken on this?

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Reply to
meyousikmann
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Let's see:

Monthly Receipts: 1200

Monthly Loan payment:

__ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Reply to
Arthur Kamlet

I'm not sure you have the financial sophistication to do your own taxes. (This is not a slam. I can barely change a light bulb.) Cash flow bears little relationship to taxable income. Your mortgage payments are a combination of principal and interest. You're deducting the interest as interest. The payment to principal builds your ownership equity, and that's covered by depreciation. You don't get to deduct them again. It looks like you're depreciating a basis of roughly $34,000. That sounds awfully low for a monthly $900 mortgage payment, so you're either miscalculating depreciation or there's something going on you haven't told us about.

Nope, if you can't deduct it twice like you wanted to on Schedule E, you certainly can't deduct it three times, twice on E and once on A.

-- Phil Marti Clarksburg, MD

Reply to
Phil Marti

Because the principal portion of mortgage payments IS NOT AN EXPENSE. Would you call putting some of the rent money into a savings account an expense? No. Well, the principal portion of a mortgage payment is essentially the same thing.

You're confusing cash flow with income. They are not the same.

Because it's not an expense. That's accounting 101.

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

Reply to
Rich Carreiro

Of course you can't double up the interest and tax deduction. Once only on Schedule E., The depreciation on the building is - more or less - "the mortgage payment". In other words, you are paying off the cost of the property and taking the interest in actual figures but the principal is being taken as depreciation - as I said, more or less. Yes, you have a net income this year. Nan, EA in LA

Reply to
Nan, EA in LA

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