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10987: 8829/2106 - Home Mortgage Taxes (Drake17 and prior)


1040 Individual

In Drake17 and prior, home mortgage and real estate taxes, are not appearing on Wks 8829; why? 

 

Starting in Drake18, due to changes from the TCJA, employee expenses for business use of home are no longer allowed. Per the 2018 Publication 587, "You can no longer claim any miscellaneous itemized deductions on Schedule A, including expenses for using your home as an employee. Miscellaneous itemized deductions are those deductions that would have been subject to the 2% of adjusted gross income limitation."  The following article applies to Drake17 and prior.

When the 8829 screen is pointed to Form 2106, the resulting Wks 8829 (WK_8829 in Drake15 and prior) does not have home mortgage interest or real estate taxes on it. IRS directs that deductible home mortgage interest and real estate taxes be included on Schedule A line 10, 11 or 6, rather than as unreimbursed employee expenses on line 21:

"Deductible mortgage interest. Although you generally deduct expenses for the business use of your home on Schedule A (Form 1040), line 21, unreimbursed employee expenses, do not include any deductible home mortgage interest on that line. Instead, deduct both the business and nonbusiness parts of this interest on line 10 or 11 of Schedule A (Form 1040). 

Real estate taxes. Deduct both the business and non-business parts of your real estate taxes on line 6 of Schedule A."

(Per 2017 IRS Publication 587, Business Use of Your Home, page 22.)

Consequently, if the 8829 screen is pointed to a 2106 and has amounts for either of these items, they are not included on the Wks 8829, but flow directly to lines 10, 11 or 6 of Schedule A. Note that 2106 expenses end up on Schedule A, Line 21 subject to the 2% limitation. In this case there is no self-employment tax involved and therefore no benefit to sending a portion of the mortgage interest or taxes to the 2106 (compared to a Schedule C, for example).


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