Tax question

[InvestorPete]

Hello everyone! This is my first tax season as a holder of an investment property. I would like to double check how my accountant filed my taxes.



To make the numbers easy, lets say I rent the property for $1000 per month while mortgage payments are $900. Property tax payments are $100 so this property is simply breaking even.



Since I only owned the property since August, I made $5000 in rent but paid $4500 in mortgage payments and $500 to property taxes.



For tax purposes, do I declare the $5000 as income but also subtract $5000 for the payments I make for a net of zero dollars or do I subtract the interest paid on the mortgage for those 5 months (whatever that may be) instead? If the interest paid during that time was $4600 that would mean there is a net of $400.



So, do I declare $0 or $400 as income from my investment property?

 

[moparcanuck]

Using your example, you would show $400 as income. Your mortgage payment is not deductible, but the interest portion is (the principal paydown is just the payback of a debt, not an expense).



PS - I assume you mean to say that there's $4100 in interest, not $4600, since having $4600 in interest but only payments of $4500 is rare. Adding the $500 in property taxes would give total expense of $4600.

 

[InvestorPete]

Thanks for your answer. Yes, your #'s make more sense. I was not using actual figures. My #'s were simply for providing an easy example.

 

[bizaro86]

Mortgage principal is not tax deductible as mentioned above.



Of course, there are other expenses that would be tax deductible. For example, insurance, condo fees, utilities, property management, maintenance, etc would be tax deductible expenses for your rental property.



Regards,



Michael