loboacounting
Level 1

I have a client that has 1.6 million mortgage principal. Part of the home rented out and other portion the client and girlfriend live. how do I go about portioning the mortgage principle and the mortgage interest? Do I use the Square footage to find out the percentage spit for the rental portion of mortgage interest and principle and then I use the whatever my client and his girlfriend paid throughout the year and if the principle split is more then 750,000 I disallowed some?

Example

10,000 square feet and 1,000 square feet is rented out.

Mortgage principle is 2 million.

And the mortgage interest is 50k.

And client paid personally 25k

And girlfriend  paid personally 15k

My understand of this is that 5000 of the mortgage interest will be deducted on the schedule E and 200,000 of the mortgage will be removed from the mortgage principal equation making it 1.8 million. For the client portion of mortgage principle is $1,125,000 which some of the 25k will be disallowed since its other 750,000 which make the mortgage interest that is deductible on his return is $16500. For the girlfriend her mortgage principle portion is $675000 which means all the 15k is deductible since its below 750K.

 

I’m I handling this situation currently and is my calculation in the example correct?  Also please feel free to include any information that you feel is important.

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