Tax Question: Do I have to claim the interest I paid on my homes?

Question

I own 2 homes, however, I rent them. I was disabled last year from a car accident for say 6 months, and made nothing, so my income was super low for only 6 months. I do have tenants that rent from me, both homes, and I don't make a penny off of it except to pay the mortgage. I know I can use the interest paid as a deduction, and that is to my benefit, but do you have to? I don't know what to do, if I do use it, then it looks like I paid that mortgage out of my pocket for the year and I did not make enough to even pay that mortgage, so how should I go about doing my taxes? Say I made something little and claim the average allowed deduction, or say I made something, and claim my huge interest deduction wihch will make it look like I made enough to pay that mortgage which I never did. My question is, do I have to claim the interest as a deduction, or can I leave it, since it only benefits me, and not the governement.

Answer 1

You are obligated by federal law to file a tax return. All of your rental income must be reported. If you fail to file, there is no statute of limitations. The government can come after you ANY TIME. You are not obligated to deduct the interest or other expenses. But it is in your best interest to do so, to bring your tax liability down. You can also deduct insurance, property taxes, repair costs etc.

I told you in your other question that the earnings limit was $8200 before you had to file. This is one of those exceptions I mentioned. Even if you have a loss, you are obligated to file. Trust me, the Internal Revenue Service is not an organization you want to screw with.

You still might be entitled to a refund if your facts are true and complete. It is not illegal to live off of your savings.

If you end up in a law suit based on your accident they will probably require you to produce your tax returns.

Answer 2

You need to file a tax return. In your case you would also have a schedule E for your two rentals. It is a requirement. It is likely you would not have income on the rentals as the mortgage interest, property tax and depreciation expense (which you must take) would exceed the income from the rentals.

If you do not file, the IRS will assume income (from the 1099 mortgage interest reported to them) and send you a computer generated letter asking for a return.

It is also advisable to file because you may sell a property in the future and a base price (basis) should be established by filing.

Again, you will not owe tax, and you will not have an open year if you file.

Answer 3

A rental property is a business, the income from which must be reported on Schedule C of your tax form. You have to report the rental income from the tenants on a Schedule C. Then you can deduct the expenses, including taxes, mortgage interest, repairs, & maybe depreciation on the same schedule. If you have not been doing this all along, you've got a problem. Better see an accountant.

Answer 4

You are never required to claim any deductions. You are required to claim the rental income. I can't think of any situation where you would benefit from not claiming the interest as an expense against the rental income. NOTE: This is an investment property, not a primary residence. Tax code treats them differently.

Answer 5

Reading between the lines, it sounds as though you are not reporting the rental income. You need to take all your paperwork to a reputable tax preparer and make sure your tax return is prepared properly. This will include computing net income (or loss) from these rental properties. Knowingly omitting income from your tax return is a serious mistake.

Renting properties that you own may be considered either a business or an investment activity, depending upon your level of involvement and the amount of time required. It's generally more favorable to you for it to be considered a business. Your tax preparer can help you sort this out also.

Answer 6

Generally speaking you have to itemize your deductions in order
to claim the interest.
And you can ONLY itemize IF your deductions are more than what
they would allow you for your standard deducions anyway.

What that means is: If you paid 1000 dollars in interest on the houses, but you would get a 2000 deduction anyway if you didn't claim it then you can't claim it .

Answer 7

Are you claiming the rental income? You should be, and expenses are taken against that income.

But to just answer the question you ask, no, you don't HAVE to claim deductions you're entitled to.

Answer 8

If your talking that kind of money, I wouldn't be asking that question here, ask a account that. Hey be safe and spend a little for the info then be sorry.

Answer 9

You do not have to claim the interest, but it is to your benefit to do so.

Answer 10

have you claimed it before if so you should do to it would red flag you next time never allow the red flags then you have to prove it next time......p.s. always take from never give too them.....