calculator deductible mortgage interest

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Forums › Finance and wealth management › calculator deductible mortgage interest

samgdan

160 posts

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#300702 28-Sep-2022 22:30

Hi all,

i've been struggling to find a reliable calculator for deductible mortgage interest.

I helping a friend with her rental property and she needs to calculate how much she can claim from the interested that she has been charged on her rental property.

could anyone please help assisting an easy way to get the figure that can be claimed?

from my understanding she paid about $18000 in her mortage interest in the past financial year. how can I know how much of those $18k she can claim?

thank you

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1133 posts

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#2974571 29-Sep-2022 01:01

Your friend should ideally seek the advice of an accountant at some point. They are running a business - rental properties are not a hobby, and it annoys me when people don’t take their business seriously enough to get proper advice on running it properly. I often find people’s first question is “what costs can I claim?” followed by shortly by “I have to pay income tax on the rent my tenant pays me?”

In any case, as you may be aware the rules around deducting mortgage interest have changed depending on when the property was bought and if it is new or existing. There are other complexities and things to consider as well. IRD websitehas a page devoted to this topic, and this includes worksheets and instructions to help calculate this - start there.

eracode

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#2974581 29-Sep-2022 05:44

If you are simply looking to calculate the split of the $18,000 into interest and principal-reduction components, it’s pretty easy to do in Excel, using a couple of the built-in financial functions. You need to split each individual payment into its P and I components and sum them separately.

(This is assuming the loan is a standard equal-payment P&I ‘table loan’ - where the periodic payments are all the same amount. In these loans the amounts attributable to P and I change in each payment).

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Handle9

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#2974582 29-Sep-2022 05:57

antonknee: Your friend should ideally seek the advice of an accountant at some point. They are running a business - rental properties are not a hobby, and it annoys me when people don’t take their business seriously enough to get proper advice on running it properly. I often find people’s first question is “what costs can I claim?” followed by shortly by “I have to pay income tax on the rent my tenant pays me?”

In any case, as you may be aware the rules around deducting mortgage interest have changed depending on when the property was bought and if it is new or existing. There are other complexities and things to consider as well. IRD websitehas a page devoted to this topic, and this includes worksheets and instructions to help calculate this - start there.

A single property really doesn't need an accountant. It takes me 2-3 hours to do our tax return, most of that is trawling through records to get all the documentation.

Handle9

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#2974585 29-Sep-2022 06:03

The first question is when was the property purchased? If it's after 27 March 2021 and not a new build then you can't deduct any interest. If it was bought prior to 27 March 2021 then it's a sliding scale.

Last tax year was a PITA as rent paid until 30 September 2021 was fully deductible and rent paid from 1 October - 31 March was 75% deductible. This tax year is much easier as it's 75% deductible.

The interest deductibility rules are here.

eracode

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#2974592 29-Sep-2022 07:27

samgdan:

Hi all,

i've been struggling to find a reliable calculator for deductible mortgage interest.

I helping a friend with her rental property and she needs to calculate how much she can claim from the interested that she has been charged on her rental property.

could anyone please help assisting an easy way to get the figure that can be claimed?

from my understanding she paid about $18000 in her mortage interest in the past financial year. how can I know how much of those $18k she can claim?

thank you

@samgdan Are you looking for advice on how to calculate the amount of interest that has been paid (as I interpreted the question) or are you looking for advice on how much of that interest is deductible (as others interpreted it)?

It's not clear from your OP.

When you say "she paid about $18000 in her mortgage interest" - do you really mean she paid that amount in P&I loan payments? Or do you already know the amount of interest that was paid - and that was $18,000?

Sometimes I just sit and think. Other times I just sit.

samgdan

160 posts

Master Geek

#2974597 29-Sep-2022 08:23

thank you for your useful message, highly appreciated.

Last two financial years have not been paid, and that is the issue here. she just realized this and wants to get things right.

I am aware of the rules that I believe the past financial year 75% can be claim and I do believe the year before 100% (I will need to triple check this)

she has requested the bank the amount of interest that she paid on each financial financial year and it is very close to $19k.

I aware that from those $19k some can be claimed, but i cant find a calculator online or even a guide how to work out the amount of money that can be claimed.

there are more expenses that can be claimed that we all are aware of and that is fine.

Yes, I know she will get a penalty from IRD for not paying the taxes on time. and before she contact them at least she wants to have an idea of how much she should pay and how much she can claim, then on top of that she will need to add the penalty.(maybe a couple of thousands? only IRD will know this)

I know an accountant can resolve this easily, but they will charge a fee and their starting point is $500 (average) I hoping if someone can help on the forum so she can save that money and use it to pay the penalty from IRD.

thank you for your help.

eracode:

samgdan:

Hi all,

i've been struggling to find a reliable calculator for deductible mortgage interest.

I helping a friend with her rental property and she needs to calculate how much she can claim from the interested that she has been charged on her rental property.

could anyone please help assisting an easy way to get the figure that can be claimed?

from my understanding she paid about $18000 in her mortage interest in the past financial year. how can I know how much of those $18k she can claim?

thank you

@samgdan Are you looking for advice on how to calculate the amount of interest that has been paid (as I interpreted the question) or are you looking for advice on how much of that interest is deductible (as others interpreted it)?

It's not clear from your OP.

When you say "she paid about $18000 in her mortgage interest" - do you really mean she paid that amount in P&I loan payments? Or do you already know the amount of interest that was paid - and that was $18,000?

samgdan

160 posts

Master Geek

#2974598 29-Sep-2022 08:25

Thank you for this valuable information, I will continue researching, i finding a bit hard to believe that I cannot find any online calculator for this scenario, unless I googling it wrong.

if you have any reliable online calculator please let me know.

thank you,

eracode:

If you are simply looking to calculate the split of the $18,000 into interest and principal-reduction components, it’s pretty easy to do in Excel, using a couple of the built-in financial functions. You need to split each individual payment into its P and I components and sum them separately.

(This is assuming the loan is a standard equal-payment P&I ‘table loan’ - where the periodic payments are all the same amount. In these loans the amounts attributable to P and I change in each payment).

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samgdan

160 posts

Master Geek

#2974599 29-Sep-2022 08:27

I agree with you, i have collected all the invoices put it together on an spreadsheet and I got almost everything ready, the last amount that I need to figure out is this one and I struggling to find an online calculator or guide that can help me, hence i asking on here.

thanks

Handle9:

antonknee: Your friend should ideally seek the advice of an accountant at some point. They are running a business - rental properties are not a hobby, and it annoys me when people don’t take their business seriously enough to get proper advice on running it properly. I often find people’s first question is “what costs can I claim?” followed by shortly by “I have to pay income tax on the rent my tenant pays me?”

In any case, as you may be aware the rules around deducting mortgage interest have changed depending on when the property was bought and if it is new or existing. There are other complexities and things to consider as well. IRD websitehas a page devoted to this topic, and this includes worksheets and instructions to help calculate this - start there.

A single property really doesn't need an accountant. It takes me 2-3 hours to do our tax return, most of that is trawling through records to get all the documentation.

samgdan

160 posts

Master Geek

#2974600 29-Sep-2022 08:29

Correct,

the same amount has been paid in the past financial year, the year before the amount was different. always fix rate.

thanks,

eracode:

If you are simply looking to calculate the split of the $18,000 into interest and principal-reduction components, it’s pretty easy to do in Excel, using a couple of the built-in financial functions. You need to split each individual payment into its P and I components and sum them separately.

(This is assuming the loan is a standard equal-payment P&I ‘table loan’ - where the periodic payments are all the same amount. In these loans the amounts attributable to P and I change in each payment).

samgdan

160 posts

Master Geek

#2974601 29-Sep-2022 08:31

Sorry if my question annoys you. and thank you for your reply.

I hope you have a good day.

antonknee: Your friend should ideally seek the advice of an accountant at some point. They are running a business - rental properties are not a hobby, and it annoys me when people don’t take their business seriously enough to get proper advice on running it properly. I often find people’s first question is “what costs can I claim?” followed by shortly by “I have to pay income tax on the rent my tenant pays me?”

In any case, as you may be aware the rules around deducting mortgage interest have changed depending on when the property was bought and if it is new or existing. There are other complexities and things to consider as well. IRD websitehas a page devoted to this topic, and this includes worksheets and instructions to help calculate this - start there.

Handle9

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#2974602 29-Sep-2022 08:41

You don’t need an online calculator, the calculations are very simple. My post above has the rates and dates when they changed.

You plug the numbers into an IR3R and you’re done. She’ll have to pay a late filing fee but it’s really not a big penalty for a low value return.

lachlanw

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#2974603 29-Sep-2022 08:44

I would pay the $500 and get a qualified accountant, after tax it's $350, if you are unsure about how to calculate the deductability of interest then you might not be providing your friend with the advice they need. Sure you can gather the info and compile a return which the IRD accepts, but that doesn't mean it is correct. An accountant might also be able to suggest other deductions that benefit your friend.

samgdan

160 posts

Master Geek

#2974610 29-Sep-2022 09:19

Thank you for your reply, i have the commitment to get this done, and your message is truly helping 💯

Regarding the penalty, well there is no way to escape from that but is ok at least she is trying to get things done right, better late than never.

thank you,

Handle9: You don’t need an online calculator, the calculations are very simple. My post above has the rates and dates when they changed.

You plug the numbers into an IR3R and you’re done. She’ll have to pay a late filing fee but it’s really not a big penalty for a low value return.

mentalinc

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#2974700 29-Sep-2022 11:44

As others have said, it sounds like she needs professional support to help minimise the issues and costs she is facing.

She likely has taxes to pay on over $60k (two years of rental income) plus penalties, this isn't something she should be asking a friend to try and solve, particularly given the basic questions you're needing to ask.

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afe66

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#2974767 29-Sep-2022 12:59

I pay an accountant for my side business, yes I could do it myself but the angst and worry of due dates and calculating provisional tax etc...

Not having to worry about something has a financial benefit.... Especially if I have pay tax for several years and there might be penalties to pay..

Pay the accountant and sleep better at night.

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