[I have no one else to ask] Is there some sort of tax benefit for renting

[battlemaiden]

your home at a loss? We will be renting our home out at a nearly $11,000/yr loss.

 

It seems to be I heard that renting at a loss can have a tax benefit. Can anyone give me some information? I would appreciate it.

 

Jo

 

I should say that the loss comes from renting at nearly $600 below our mortgage payment--- time to tighten the belt.

[Kathleen in VA]

Jo,

 

My husband says yes - when you operate with a negative cashflow you do get to write that off on your taxes. He also says you *definitely* need to have an accountant help you with this.

[Carol in Cal.]

There are different rules for different cases.

 

The Nolo Press book about being a Landlord is very helpful in sorting through this. In some cases, I believe that you can still be considered an active manager even if you have a management company doing most of the work of running the place. The rules are a little bit tricky, but can be navigated with care.

[Shenan]

Yes! There is a tax benefit. We rented at a loss last year. Our tax preparer said it is considered a business loss. Our House was a rental/business and the rent was considered business income, the difference between the rent and the mortgage payment was considered a business loss AND the upkeep of the home (taxes, insurance, upgrades to rent) is also considered business expenses. So we operated with a business loss of $24,000 last year. All fine and good as long you can continue to pay the difference between the rent income and the mortgage payment. :glare:

 

It's late for me and I hope the above statement makes sense to ya.:D

[mbeaser]

This is one of those things you should definitely speak to an accountant about. I'm not certain that you'd be able to count the house as a primary residence when selling it at a later date if you used it as a business expense (even if you were meeting the living in it 3 of the last 5 years requirement). We've rented out a house for the last 3 years, and have had to depreciate it each year (I think it is a 20 year deprciation, but I'm not digging through 12000lbs of stuff to find out just now). You also won't be able to do the mortgage deductions (that you get with itemizing), but they will be used to offset your rent so that you don't have to count it as income. I used to do all our taxes myself (and I mean by hand), but it got a bit too complex when we started renting. No 2 tax software programs treat it the same, so it is very confusing. Right now, we haven't even depreciated the house down to the level that the market has fallen to :glare: so I'm not worried about "profits" in later tax years yet.

[Jackie in NE]

Do you currently prepare your own taxes? If so, check out a 1040 schedule E. This is the form you need to declare your rental income or loss. It's pretty straightforward.

 

If you currently have someone else prepare your taxes, they should be very familiar with this form. You may still want to familiarize yourself with this form, however, as it might help you to track your expenses during the year, and think about how you want to account for these expenses. For example, some people use a completely different bank account for their rental properties, just to help keep these expenses separate and easily tracked.

 

hth, Jackie

[battlemaiden]

You are all my heros! This gave me so much to think about and look into. I didn't really know where to start. And Jackie, the idea about a separate bank account sounds wise. Brilliant people! You are brilliant.

 

Thanks.

 

Jo