Robot wrote:

- quote -

The mortgage payment is not deductible for the part that is
payment of principal. If the property has both businesses
and personal use, the amount of interest related to the
property that is business use is deductible with regard to
the business, i.e. Schedule C, line 16a, and the amount of
interest related to the property that is personal use is
deductible on Schedule A, either line 10 or 11.

A follow up to the other posters with regard to
depreciation. The deduction for depreciation is allowed
whether there is a mortgage on the building, or any other
depreciable property or not. Also, if depreciation is
allowed for the building, whether you take the deduction or
not, you must adjust your basis in the building when the
property is later sold.

If you want more information on depreciation, check the IRS
website for the following -

Publication 946, How To Depreciate Property
==> http://www.irs.gov/pub/irs-pdf/p946.pdf

and -

Form 4562 Depreciation and Amortization
==> http://www.irs.gov/pub/irs-fill/f4562.pdf
and instructions
==> http://www.irs.gov/pub/irs-pdf/i4562.pdf
Form 8829 Expenses for Business Use of Your Home
==> http://www.irs.gov/pub/irs-fill/f8829.pdf
and instructions
==> http://www.irs.gov/pub/irs-pdf/i8829.pdf

The following may also prove useful -

Publication 17 Your Federal Income Tax
==> http://www.irs.gov/pub/irs-pdf/p17.pdf
Publication 535 Business Expenses
==> http://www.irs.gov/pub/irs-pdf/p535.pdf
Publication 334 Tax Guide for Small Business
==> http://www.irs.gov/pub/irs-pdf/p334.pdf

However, I do recommend you seeing a tax pro (CPA, EA) to help get
things set up for the first year you are in business, especially since
it seems that this involves a prior year.

--
** Working to make "taxes less taxing" **

Ohio Tax Man - Robert Thompson
Westerville (Columbus) Ohio

My free advice is worth what you pay for it.

Of course, as in all things tax - it will depend on the
specific facts and circumstances of your particular
situation.

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"Robot" <robot[NoSpam][at]earthlink.net> wrote:

- quote -

Are you trying to deduct the principal? Can't ever do that.

Don Rosenberg, EA

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- quote -

You should already have a deduction for the house payment -
under DEPRECIATION.

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Robot <robot[NoSpam][at]earthlink.net> writes:

- quote -

It's called depreciation. See IRS Publication 587 for
starters.

Phil Marti
Topeka, KS

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"Robot" <robot[NoSpam][at]earthlink.net> wrote:

- quote -

If it will make you feel any better, you could not deduct
the mortgage payments even if it were 100% business.
Mortgage payments are never deductable. I'll leave it to
others to explain the finers details.

--
Jo Firey

"Life is not measured by the number of breaths we take, but
by the moments that take our breath away."

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"Robot" <robot[NoSpam][at]earthlink.net> wrote:

- quote -

Your question indicates that you do not truly understand the
issues involved. You really should consult a professional
for your tax and accounting.

You cannot deduct the mortgage payment, per se. That
portion that represents interest and, when actually paid,
taxes, is deductible. You may also deduct any amounts paid
from the mortgage escrow accounts - when they are paid from
the escrow account. The principal portion of the payment is
not an expense; it is your cost of acquiring an asset --the
property.

What you don't seem to realize is that you should be
deducting depreciation. If you have not been doing so, you
really do need help. When you sell the property, you must
reduce the basis by the depreciation that was allowable from
your basis, regardless of whether you took the deduction or
not.

Get some help, as soon as possible. You will almost
certainly save more than the few hundred dollars a
professional will charge you.

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Robot <robot[NoSpam][at]earthlink.net> writes:

- quote -

No, because the portion of the mortgage payment that is
repayment of principal is NOT an expense. Ultimately, you're
not paying it to anyone but yourself. You're just shifting
the asset from one "pocket" to the other. The "Cash" asset
is being reduced, but the "equity in building" asset is
being increased by an equal amount.

Don't confuse "inbound" cash flow with income and don't
confuse "outbound" cash flow with expense. They are not at
all necessarily the same, and mortgage payments are a
perfect example of that.

- quote -

Nope.

- quote -

The principal portion of the payments isn't remotely an
expense of any sort. The money isn't going anywhere -- it's
just being shifted between assets.

- quote -

Not at all. Unlike repayment of principal, those are
payments that are actually expenses. The cash being paid
out to cover them is truly "lost", unlike the cash paid out
to cover principal payments.

- quote -

No.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Several years ago we built a home where we could run our
business. It has storage, office space, work space, etc.,
all specially designed to house the business. We live
upstairs in just 3 rooms, including a living room and
kitchen. The rest is dedicated to business.

My question:
We built the house so that we wouldn't be just making rent
payments elsewhere for the same space we now have in this
house.

But isn't there a way to deduct the percentage of the
mortgage payments on the house that relates to the business
use (about 60% is purely business)?

I know that I can deduct INDIRECT expenses for mortgage
INTEREST and property taxes, utilities, etc. - but how about
the actual HOUSE PAYMENT? These payments are a major part of
my business expense, just as rent would be, if I rented
space instead of purchased this house.

I've thought about the possibility of claiming that I'm
buying this as a business location, where I just HAPPEN to
live.

Again, this is not simply a little "home office"
afterthought, but the house was built with this business in
mind.

Deducting only interest, taxes, and indirect utilities, etc.
seems ridiculous.

Is there a way to deduct the business portion of the
mortgage payments?

Thanks!

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