Author: Leon Clinton

If you refinanced a rental property and took cash out, or if you plan to do so, how you spend that money determines whether you can deduct the interest.

Tax law follows the money, not the property securing the loan. 

If you use the refinancing cash for personal purposes, the interest on that portion is non-deductible personal interest even though your rental secures the loan. The part of the loan that replaced your original rental mortgage remains rental debt, and that interest stays deductible.

There is good news. IRS rules require that principal payments pay off the personal portion of a loan first. Every principal payment you have made after the refinance reduces the non-deductible portion before touching the rental portion. 

Once you have repaid an amount equal to the personal cash-out, the entire remaining balance is rental debt again. If you refinanced in a prior year, you may have been deducting too little interest.

If you refinance in the future, take these steps:

• Deposit the proceeds in a new, separate account, and spend directly from it for the intended purpose.
• Avoid depositing loan proceeds into your existing checking account. Under IRS rules, the IRS treats any spending from that account as coming from the loan proceeds first, which can turn deductible interest into personal interest.

If you want to discuss refinancing a property, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• October 23, 2026

If you offer customers a rebate or discount on your commission, how you handle it can affect your taxes. Here is what to know for 2026.

The Best Approach: Reduce Your Commission at Closing

When the discount comes off your commission before you are paid, your Form 1099-NEC shows the lower amount. There is nothing to deduct, nothing to document, and no question about the payment. Money that never reaches you is never income to you.

If You Write a Check, Write It to the Buyer

The IRS treats a rebate from the buyer’s agent to the purchaser as a reduction in the purchase price, not income to the buyer. You issue no Form 1099, and the buyer reduces their basis in the home. 

How you treat the payment on your own return is less settled, because the IRS has suspended part of its guidance on deducting rebates. That’s another reason to reduce the commission instead.

Employees Face a Harsher Result

A W-2 employee who rebates commissions still reports the full commission and, under current law, gets no deduction for the rebate. Independent contractor agents who file Schedule C are not affected by this rule.

Check your state’s law. About 10 states prohibit commission rebates. In those states, the rebate is an illegal payment, and illegal payments are generally not deductible.

If you want to discuss rebates, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• October 20, 2026

If you are self-employed and also have access to an office elsewhere, you may assume you cannot deduct a home office. Many people believe this, and IRS auditors sometimes raise it. But the law says otherwise, and the IRS’s own guidance backs you up.

Your home office qualifies as your principal place of business when you

• use it exclusively and regularly for administrative or management tasks, such as billing, recordkeeping, and scheduling; and
• have no other fixed location where you conduct substantial administrative or management activities.

IRS Publication 587 confirms that you can have more than one business location, including your home. It also states that having suitable space outside your home does not disqualify you if you choose to do that work at home instead.

You may have heard about the Soliman case, in which an anesthesiologist lost his home-office deduction. Congress overturned that result for tax years beginning after 1998, however, and the IRS now uses this case’s facts as an example of a qualifying home office.

Two points to keep in mind for 2026:

1. W-2 employees can no longer deduct a home office, and this change is permanent. If you operate your business as a corporation, have the corporation reimburse your home office so you have a corporate deduction instead.
2. For the self-employed, when your home office is your principal place of business, trips from home to other work locations become deductible business mileage rather than commuting.

If you want to discuss the home-office deduction, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• October 16, 2026