San Diego Housing Market News and Analysis
Tax Writeoff - Rental
User Forum Topic
Submitted by 23109VC on April 2, 2006 - 4:56pm
I posted a question regarding possibly renting my house, albeit negative. I'd lose money every month.
If I no longer occupy the home, and rent it out - I believe I no longer can claim all the home interest and taxes as a writeoff/deduction. Instead, I have to declare the rent received as INCOME and then the costs are expenses. In my case, the expenses (interest, taxes, depreciation, other misc costs) would easily outweigh the rent I recieved - to a tune of at least $1300 a month.
If I can only claim $1300/month as a "loss" I will have a much smaller deduction - as I currently write off about $2000/month in mortgage interest. I know I can write off some of this "passive" loss against my income, but I earn about $125k/year and I hear that some of this loss may get phased out at my income level.
If I do rent my house, I may just have to rent a home to live in in the new area I move to. Once again, I don't get a write off on th rent that I pay at th enew place.
I know it's probably illegal - but how often to people who rent out their homes, never report the home as a rental, never report the rents received, and just continue to write off the home interest as if they lived there.
Is it one of those things you aren't supposed to do, but "everyone does it", or would this be a one way ticket to getting nailed to the wall by the IRS.
I'm moving, and my house if for sale in this horribly slow market. If my house will not sell, I may be forced to rent it to ultimately relocate. If the tax benefits of renting the house end up being LESS than when I lived in the house - so that I pay more in taxes by renting it than I did living in it - the effecitive amount I will be "negative" may be even bigger than I am calculating.
Any suggestions or advice?
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