I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.
Not sure I completely follow.
Did you include the interest on the loan, the property taxes and the insurance ? These add up to considerably more than the rent, since you said you would be negative 500-700 per month. Add the HOA and depreciation and you are looking at a tax loss of probably 1200-1500 per month.
Sure you’re actual tax write off might be a bit less than if you lived in it. But, do not isolate payment of taxes as a single consideration. Compute all expenses after taxes for whatever scenarios you are considering.
E.g. – If you live in the unit and continue to pay 2000 per month and 1700 is deductible, living in the unit might cost you $1400 per month after taxes (assume 35% in tax relief, might be less). If you rent it out for $1K per month, and you have a tax loss of 1K per month (including depreciation), you have an after-tax negative cash flow of about 700 minus taxes on 1K, let’s say $350. So your after tax monthly carrying costs are 350 per month.
Again, consider everything (cash in, cash out, including income and taxes) for a complete picture. Sure you would have a somewhat lower tax break because of the 1K per momth income. But don’t ignore the fact that you would be getting the additional 1K per month of income.
Also, I want to emphasize that if your hold-and-rent strategy is based on trying to sell within the next 3 years, you might as well sell it today.
