Hello Community
In 2021, I sold an Investment Property.
The Proceeds from that sale, I used to pay off the Mortgage on my principal residence (the house I'm living in)
There was a Prepayment penalty which I had to pay to close the mortgage on the principal residence.
Can the penalty be used as a tax credit somehow and, if so, where do I enter it?
As per Turbo Tax, Prepayment Penalty is treated as a capital expenditure and is not deductible, however: there are exceptions to this rule:
Based on your situation, it is similar to the 1st exception wherein you sold your rental property and a prepayment penalty was made to pay off the balance early. Therefore, you may reduce your capital gains or loss to the prepayment penalty made which would also reduce your taxable capital gains/allowable capital loss.
For more information please see our TurboTax article Tax Treatment of Prepayment Penalties.
Thank you for choosing Turbo Tax.
Hi Ram
The question doesn't have anything to do with the Capital Property. It is to do with my principal residence. And I probably asked the question wrong.
If I live in a home that had a mortgage. Then decided to pay the mortgage off early. """ Are the penalties I pay, tax deductible in some way?
As this is a personal debt not a business debt, you can't claim a deduction for the penalty paid for paying off your mortgage early.
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