I know that home mortgage interest is deductable against personal income but is it deductible on 1099 income?

Question

I have significant mortgage interest paid in 2006 on my home and all of my income was subcontractor (1099) income.

In 2005, my tax preparer told me I couldn't deduct the mortgage interest on 1099 income but now several people have told me that I can.

Which is it? Can I deduct the mortgage interest against my sub contractor income?

Thanks!

Answer 1

What sort of tax preparer did you use in 2005? The only reason it is not worth deducting is if the Standard Deduction is better for you than itemizing. Maybe your preparer did not explain it very well.

It is true, though, that mortgage interest, is not generally deductible against 1099 income directly (the exception being that part which relates to a deductible home-office). Mortgage interest goes on Schedule A and is deducted from all taxable income. What this means is that you pay SE tax on your 1099 profits rather than 1099 profits less mortgage interest.

Take a look at your 2005 return. Did you just take the standard deduction? If so, take another look at your itemizable deductions. The main ones are:
Mortgage interest actually paid in the year
Property taxes actually paid in the year so far as they relate to the value of the property
State income taxes actually paid during the year
Charitable contributions actually paid during the year (minus anything given to Tsunami relief in January 2005 and claimed on the 2004 return)

If the total adds up to more than the Standard Deduction for your filing status, which you can find on the front of the return, you will need to do an amended return for 2005. See a new accountant if you have to do this.

Edit: Wealthbuilder, if you take the time to read my (or anyone else's) answer, you will see that I covered the same points as you did, only more generally.

Answer 2

Unlike the previous answers, I don't think they understand the question.

The question is really , "can I deduct mortgage interest DIRECTLY against 1099MISC income?".

You would do this to reduce S/E tax, not just INCOME tax.

You CAN deduct mortfgage interest on Schedule C, but only to the extent that you had an Office in Home. You would use Form 8829 to report the percentage of you home used exclusively for business, along with property taxes, utilities, and other related expenses. If you used 200 s.f. of a 2000 s.f. house, you would be able to deduct 10% of all the related house expenses against your 1099MISC income. You could also claim 10% of the depreciation of the house (approx. 10% x 2.64% of the basis)

The UNUSED portion of the mortgage interest and taxes could still be deducted on Sch A if you itemize.

Enrolled Agent / Tax Advisor

Answer 3

Of course you can. You need to find a new tax preparer. You file your taxes as self employed and you will have to pay all your employment and various other taxes, so if your preparer knows his/her stuff they can eventually get you money back.

I was self employed for two years while I went to college, and had a rental house and two kids. I made $50K + and paid not one dime in taxes. By the time my tax chick got done I got back almost $4K. Everything was legal and I have all the documentation, but she knew what thing went where and how to help me get the most I could.

And just so it is clear ALL my income was on 1099s that year.

Answer 4

end of september. fill interior the form on line. be helpful you incorporate activity on any loans as expenditure and capital depreciation of any fastened sources. on your first accounting 12 months you mustn't be paying tax. in fact in case you ought to use an accountant he could desire to have the skill to get a deficit on the 1st 12 months. in spite of everything the tax place of work will deliver you a invoice for charge in 2 halves beginning jan next 12 months. this could have a due date and then they value activity on the quantity after that date. that's in many situations clever in case you like a private loan because of the fact the activity charged is below the economic enterprise fee and you're able to use this money for some months rather of borrowing from the economic enterprise. do no longer attempt this with the vat place of work however they are not as versatile