You must file Form 1040 and itemize deductions on Schedule A Form 1040.
Figure the balance of that category of debt for each month. Publications 527, Residential Rental Property, and 535. You can deduct these points only over the life of the loan. After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. The statement will show the total interest you paid during the year. The more difficult, but potentially more lucrative, path involves a stack of receipts and a very sharp pencil. If line 8 is equal to or more than line 9, stop here.
If two persons and dependents of either share the same sleeping quarters, they are treated as one tenant. Multiply the amount in item 1 by the decimal amount on line 11. Figure your deductible points for the current year using the rules explained under Points in Part I. The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. Both you and the lender must intend that the loan be repaid. Instead, they must be deducted over the life of the loan. As a general rule, Form 1098 will include only points that you can fully deduct in the year paid.
Acquiring an interest in a home because of a divorce. Form 1098 you received, deduct only your share of the interest on Schedule A Form 1040, line 10. Use of Your Home Including Use by Day-Care Providers. Subtract the amount on line 12 from the amount on line 10. This form will show the amount of interest to enter on line 10.
Not just a shelter from the elements, your home also serves as a valuable tax shelter. Divide the amount on line 1 by the amount on line 2. You did not prepay more than one month's principal during the year. Divide the amount on line 8 by the amount on line 9. The rented part of your home is used by the tenant primarily for residential living. Brown had a home equity loan secured by her main home all year.