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Is My Co-op Maintenance Tax Deductible?

Dear Ali: I own a co-op apartment, and my maintenance is $550 a month, which comes to $6,600 a year. I was told that it's 50 percent tax-deductible. Does that mean I get half of it back?
A: Not quite. It means that you can deduct half of it from your income when you file your taxes (which, by the way, you'd better do tomorrow). If you make $50,000 a year, and claim $3,300 in deductions, you'll only have to pay tax on $46,700 of income. If you're in a 20 percent tax bracket, that will save you $660 a year, not $3,300 a year.

Still, $660 a year ain't hay. To claim your deduction, you'll have to itemize your deductions by filing a "Schedule A" with your taxes. Your deduction probably has two parts, mortgage interest and real estate taxes, and there are places on the Schedule A to report both.

The natural question in your head is probably "how do I know how much of my maintenance is real estate taxes and how much is mortgage interest?" The answer is that the co-op will tell you by sending you a form -- it's called Form 1098 -- or an official letter saying something like, "you can deduct $1 per share of mortgage interest and $2 per share for real estate taxes."

If you've taken out a loan to purchase the co-op in the first place, that's essentially a mortgage, and the interest payments on that loan are deductible too, up to the first million of loan balance. So you might be in a situation where your deductions are greater than you thought, because you have the $3,300 from your co-op maintenance plus whatever the interest you're paying on the loan is -- that could be $5,000, $10,000, or even more, depending on what you paid for your place.

Good luck!

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