For self employed home office deduction, does the 750k loan limit apply to mortgage interest?

This is a great question about the home office deduction and mortgage interest! The $750k mortgage loan limit does indeed come into play here. First, you need to understand that there are two separate issues: the personal mortgage interest deduction (which has the $750k limit) and the business expense deduction for a home office. For your business deduction (Schedule C), you can deduct the portion of your mortgage interest that relates to your home office space. However, you first need to calculate the allowable mortgage interest based on the $750k limit, then apply your business use percentage (30%) to that amount. So if your $1.8M mortgage is generating $75k in interest, you would need to calculate what portion of that interest corresponds to the first $750k of the loan (roughly $31,250 if the interest rate is consistent). Then you would take 30% of that amount as your business deduction.

I was in a similar situation last year with my home office deduction. After struggling to figure out the right approach, I found this AI tool called taxr.ai (https://taxr.ai) that helped me untangle all the mortgage interest deduction rules. I uploaded my mortgage statements and some notes about my home office, and it gave me a detailed breakdown of exactly how much I could claim based on the $750k limit first, then applying my office percentage. Way easier than trying to interpret all the IRS guidance myself. The tool clarified that I needed to calculate what portion of my interest related to the first $750k of my loan before applying my business use percentage. Saved me from a potential audit headache.

Just wanted to follow up about taxr.ai that was mentioned earlier. I decided to try it for my home office situation and it was seriously helpful. I have that detached office structure I mentioned, and the tool walked me through exactly how to handle the mixed-use calculations, including the mortgage interest limits. It flagged that I've been calculating my deduction wrong for YEARS - I was taking too much for my mortgage interest without applying the loan limit first. The interface was super clear about explaining the 750k mortgage cap before applying the business percentage. Pretty sure it saved me from an audit.

If you're having trouble getting a clear answer from the IRS about this mortgage limit question, I highly recommend using Claimyr (https://claimyr.com). I had the exact same question about applying the $750k limit to my home office deduction and was getting nowhere with the standard IRS phone number - kept getting disconnected after waiting for hours. With Claimyr, I got through to an actual IRS agent in about 25 minutes who confirmed the exact calculation method. You can check out how it works in this demo: https://youtu.be/_kiP6q8DX5c Basically, they hold your place in the IRS phone queue and call you when an agent is about to answer. The agent explicitly told me that for business purposes, I need to first apply the $750k limitation to calculate eligible interest, then apply my business percentage to that amount.

OK I need to eat my words about Claimyr. After posting that skeptical comment, I was still desperate for answers about my own mortgage interest deduction, so I tried it anyway. I figured if it was a scam I'd just dispute the charge. But it actually worked perfectly. I got a call back in about 40 minutes, and was connected to an IRS agent who walked me through the exact calculation for my situation. The agent confirmed that yes, you first calculate what portion of your interest would be on a $750k loan, THEN apply your business percentage. For the original poster with the $1.8M mortgage, this makes a huge difference. If anyone else is on the fence about using the service, it's legitimate and saved me hours of hold time.

Don't overthink this. Here's the simple way to look at it: 1) The TCJA limits PERSONAL mortgage interest deduction to interest on the first $750k of loan 2) For Schedule C business expenses, you're deducting BUSINESS expenses not personal 3) So you take your FULL mortgage interest ($75k), multiply by your business use % (30%) 4) That gives you $22,500 as a legitimate business expense I've been doing this for years and have never had an issue. The $750k limit is for Schedule A itemized deductions, not Schedule C business expenses.

This is a common area of confusion. I think some of the answers here are mixing up different concepts. For clarity: The $750k mortgage loan limit DOES apply even for the business portion of mortgage interest. The IRS position is that any interest on debt exceeding $750k is personal consumption, not an ordinary and necessary business expense. You need to: 1. Calculate what portion of your total interest applies to the first $750k 2. Apply your business use percentage (30%) to THAT amount 3. Report that on Schedule C