Question Details

Robert Leary, Real Estate Pro in Washington, DC

Does anyone know if making additional mortgage payments on an investment property can reduce the taxes due on income earned from that property?

Asked by Robert Leary, Washington, DC Sun Mar 4, 2012

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As I said, I would check with an accountant, but you would only avoid paying income tax if your depreciation and expenses, which do not include paying down principal, are more than the rent you collect. Once you pay the mortgage off, you will lose the deduction you get from interest.
0 votes Thank Flag Link Sun Mar 4, 2012
If I can take the income that we are making on the property and avoid paying income taxes on it by dumping it back into the property in the form of additional mortgage payments I'm confident the overall reduction will be greater, plus we will pay this property off in no time and therefore pay much less interest.
0 votes Thank Flag Link Sun Mar 4, 2012
Although it is best to speak to an accountant about this, it would probably hurt, rather than help. Mortgage interest is one of the line items that is deductible on the Schedule E, there is no line for additional principal. When additional mortgage payments are made it goes towards paying down principal, giving a smaller interest deduction. If the goal is to have the biggest deduction, or loss, from the property, then having the highest amount of interest to deduct is preferable.
0 votes Thank Flag Link Sun Mar 4, 2012
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