Home Office Deduction Mortgage Interest

But the tcja placed a significant restriction on home equity debt beginning with the 2018 tax year. If you re self employed and you ve been working from home since the beginning of the covid 19 crisis you can use some of your ppp funds to cover utilities rent and mortgage interest expenses for your home. So if you use a whole room or part of a room for conducting your business you need to figure out the percentage.

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Mortgage interest irs publication 936 home mortgage interest deduction provides details on calculating this deduction.

Home office deduction mortgage interest. First the mortgage interest deduction includes that which you paid on loans to buy a home on home equity lines of credit and on construction loans. Here s our primer on home office deductions and how they work with the paycheck protection program. But if you write off 5 000 as a business expense and the remaining 15 000 in mortgage interest expense as a personal itemized deduction then your tax liability would be 28 574. You would enter the entire 10 000 as an indirect expense on the home office information screen.

1 000 10 000 x 10 of the mortgage interest will show up on form 8829 as a home office deduction. Note that if you bought your home before december 16 2017 the deduction is limited to interest on mortgage debts below 1 million. To calculate the percentage of work space in the home expenses you can deduct use a reasonable basis such as the area of the work space divided by the total finished area including hallways bathrooms kitchens etc. If your home mortgage interest deduction is limited under the rules explained in part ii but all or part of the mortgage proceeds were used for business investment or other deductible activities see table 2 near the end of this publication.

It shows where to deduct the part of your excess interest that is for those activities. Generally when using the regular method deductions for a home office are based on the percentage of your home devoted to business use. These expenses may include mortgage interest insurance utilities repairs and depreciation. However you cannot deduct mortgage interest or capital cost allowance.

I originally entered my mortgage interest and property taxes in the business home office section. For example suppose you have 10 000 of mortgage interest and the home office percentage of your home is 10. That equates to. My home office is only 8 2 of the whole home so i checked the box yes to have the rest of the mortgage interest deducted for the rest of the home.

I also originally added the 1098 mortgage interest property tax information in the personal deductions section. Because mortgage interest and real estate taxes are deductible without regard to the home office deduction the real advantage of the home office deduction for homeowners is that it converts an itemized deduction into a far more tax advantaged business expense deduction. The tcja lowered this limit to 750 000 for mortgage debt taken out after december 15.