Is Mortgage Interest on a Rental Property Tax‑Deductible?

Answer

Many U.S. landlords wonder if they can write off mortgage interest on their rental homes. Understanding how to claim this expense correctly can lower your taxable rental income and improve cash flow.

When you finance a property held for rent, the interest you pay on the mortgage qualifies as an ordinary and necessary rental expense. To deduct it:

• Report on Schedule E: Enter total mortgage interest paid on IRS Form 1040, Schedule E. This separates rental income and expenses from your personal filings.
• Allocate mixed‑use loans: If you use the property part‑time for personal purposes (e.g., a vacation home you rent out seasonally), calculate the percentage of days rented vs. personal use. Deduct only the portion tied to rental activity.
• Include loan points and fees: If you paid points to secure the mortgage, those may be amortizable over the life of the loan. Check IRS Publication 527 for details or consult a tax professional.
• Bypass SALT cap: Unlike personal home loans, rental mortgage interest isn’t subject to the $10,000 state and local tax deduction limit introduced by the Tax Cuts and Jobs Act.
• Mind passive activity limits: Rental losses—including excessive interest beyond rental income—may be limited under passive activity loss rules, unless you qualify as a real estate professional.

Beyond interest, remember to deduct other operating costs—property taxes, insurance, repairs and depreciation—to minimize your net rental income.

Before finalizing your tax return, it’s advisable to consult a licensed tax advisor or review the IRS Publication 527 for comprehensive guidance and to ensure you meet all documentation requirements.