Are DSCR loan interest payments tax deductible?
Yes. DSCR loan interest, points, and qualifying loan costs are deductible against rental income on Schedule E.
DSCR loan interest is tax deductible as an ordinary business expense on Schedule E (rental real estate). Specifically deductible: mortgage interest paid during the tax year, origination points (amortized over loan term), property taxes (when paid by escrow or directly), insurance premiums, repair and maintenance expenses, depreciation (27.5-year straight-line for residential), and reasonable management fees. The "tax-loss" generated from a rental property (depreciation often exceeds rental income) can be used against other rental income. Whether it can offset W-2 income depends on your "real estate professional" status under IRS rules - most passive investors cannot, but active full-time real estate operators can. State tax treatment varies; states with no income tax (FL, TX, TN, NV, WY, NH, SD, AK) eliminate state-level concerns entirely. For complex tax situations (1031 exchanges, cost segregation, opportunity zones), consult a CPA familiar with real estate before tax filing.
People also ask
Are DSCR loan origination fees deductible?
Yes, but amortized over the life of the loan rather than deducted in the year paid. A 1.5-point origination fee on a 30-year loan deducts ~5% of total points each year.
Can I deduct DSCR loan closing costs?
Some yes, some no. Origination fees: yes, amortized. Title insurance, recording fees, attorney fees: capitalized into property basis (recovered through depreciation or at sale).
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