[quote=plm]I would never try to do this but I think theoretically it is possible but tricky since you have to charge at least fair market rent. Suppose you get a mortgage such that the interest plus depreciation of the home is equal to the rent. Then there is no income to pay taxes on but you can deduct the interest and property taxes.
I suppose you would have to sell within 2 years or stop renting for three years before selling to get the cap gains exclusion.
As an extra benefit, all repairs would be deductible as well as well as new appliances. Could write off the gardener as well. I wonder if you could rent it furnished so you can write of cable, telephone, sdg+e, and water![/quote]
This is an interesting discussion… not trying to poke holes in a negative way , just seeing how this could possibly work…..
Maybe renting to your friend and you renting from your friend?
The problem is when you sell, you would have to pay for depreciation
recapture unless you 1031 exchange it and then convert it back to a primary residence and spend more time in it relative to how long it was used as a rental such that the depreciation recapture is a percentage of use as a rental versus total usage as primary and as rental… or…you die and your spouse or heirs gets a step up and the recapture gets wiped clean.
