[quote=spdrun]The way to do it is clear, just not legal. Keep “living” in the unit…[/quote]
Independent of the legality, treating the rental as a primary may or may not be beneficial.
It depends on your ultimate goals for the property.
If you are going to hold for your lifetime to provide retirement income and pass to your children it makes no sense to continue to treat it as a personal residence for a future tax break on the sale that your heirs would get anyway.
One of the advantages to rental real estate is having the potential for tax sheltered income due to paper losses.
Here are some issues:
1. You cannot depreciate the property or upgrades
2. You cannot deduct insurance, maintenance, utilities between tenants, advertising costs.
3. Limitation on tax deductible interest to $1 Mil.
(If you have two $600k loans you can’t deduct the full amount.
4. AMT limitations on the property tax deductibility.
There are probably a lot of other issues to consider.
Not saying that it’s better to treat as a rental for all cases. But there are plenty of scenarios where cheating and treating as a primary may not even pencil out.
