How to split mortgage interest

how to split mortgage interest

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9:04 pm PST November 26, 2013

The typical handling of a monthly mortgage payment - involving a rental or not - is that a small piece of the payment goes to interest expense, a very big piece of the payment goes to paying down mortgage principal (a liability on your balance sheet) and a (typically) regular amount goes to an escrow Account (an asset on your balance sheet).  (It's the payment out of escrow of property taxes by the loan servicer, not that monthly amount included in the mortgage payment, that's a deduction for tax purposes.  From an accounting standpoint you'd reduce that escrow asset Account by the amount of the payment by the servicer and charge an escrow account expense.)

You can do the accounting for

the monthly payment manually by reference to the loan amortization schedule you certainly received when you took out the loan.  Each month you'd pay the same amount (presumably) out of your checking account, splitting the total among interest expense, the reduction of the mortgage liability and the increase in the escrow account.

Assuming the mortgage is a "standard" in arrears mortgage you can also use the Quicken loan "wizard" to calculate the split between interest and principal (plus an escrow amount) and Quicken can automatically make the accounting entry for you.

One way or the other you need to get these elements of your payments - interest, principal and escrow - properly stated in Quicken if you hope to use Quicken as the basis for entries to your tax return.

Source: qlc.intuit.com

Category: Credit

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