! purposes and you claimed a deduction in 2025 on

CAUTION Schedule 1-A (Form 1040) for the vehicle loan interest

allocable to your personal use, then you can’t claim a deduction for that same interest on Schedule E. See Schedule 1-A (Form 1040) and its instructions for more information.

Line 10 Include on line 10 fees for tax advice and the preparation of tax forms related to your rental real estate or royalty properties.

Do not deduct legal fees paid or incurred to defend or protect title to property, to recover property, or to develop or improve property. Instead, you must capitalize these fees and add them to the property’s basis.

Lines 12 and 13 In most cases, to determine the interest expense allocable to your rental activities, you must have records to show how the proceeds of each debt were used. Specific tracing rules apply for allocating debt proceeds and repayment. In general, you allocate interest on a loan the same way you allocate the loan proceeds. You allocate loan proceeds by tracing disbursements to specific uses.

TIP

The easiest way to trace disbursements to specific uses is to keep the proceeds of a particular loan separate from any other funds.

Limitation on business interest. Interest you paid as part of your rental real estate activity is not subject to the limitation on business interest unless your rental real estate activity is a trade or business. If your rental real estate activity is a trade or business, you must file Form 8990 to deduct any interest expenses of that rental real estate activity unless you meet one of the filing exceptions in the Instructions for Form 8990.

If the interest you paid in your rental real estate trade or business is limited, figure the limit on your business interest expenses on Form 8990 before completing lines 12 and 13. Follow the instructions under How to report , later, but report the reduced interest on lines 12 and 13. The interest you can’t deduct this year will carry forward to next year on Form 8990.

If your real estate activity is not a trade or business or you meet one of the filing exceptions for Form 8990, follow the instructions under How to report, later, and report all of your deductible interest on lines 12 and 13.

How to report. If you have a mortgage on your rental property, enter on line 12 the amount of interest you paid for 2025 to banks or other financial institutions.

Do not deduct prepaid interest when you paid it. You can deduct it only in the year to which it is properly allocable. Points, including loan origination fees, charged only for the use of money must be deducted over the life of the loan.

If you paid $600 or more in interest on a mortgage during 2025, the recipient should send you a Form 1098 or similar statement by January 31, 2026, showing the total interest received from you.

If you paid more mortgage interest than is shown on your Form 1098 or similar statement, see Pub. 334 regarding deduction limits to find out if you can deduct part or all of the additional interest. If you can, enter the entire deductible amount on line 12. Attach a statement to your return explaining the difference. In the space to the left of line 12, enter “See attached.”

Note: If the recipient was not a financial institution or you did not receive a Form 1098 from the recipient, report your deductible mortgage interest on line 13.

If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on the mortgage, and the other person received Form 1098, report your share of the deductible interest on line 13. Attach a statement to your return showing the name and address of the person who received Form 1098. On the dotted line next to line 13, enter “See attached.”

If you use your vehicle for both business and personal