Today TaxMama hears from Chris in NY. “In the terrible real estate market, we haven’t been able to sell our house. But someone contacted us who wants to rent most of it. The rest we would use for storage and occasionally for staying overnight. Meanwhile, we’ll move in with relatives and, hopefully, stave off foreclosure. If we agree, will we lose the ability to deduct the property taxes?”
That’s an excellent idea!
Hopefully, you’ll get enough money to cover your mortgage, insurance and property taxes – or at least most of it.
No, you won’t lose the right to deduct property taxes. You’ll simply deduct them on Schedule E, page 1 – the Rental property schedule, http://www.irs.gov/pub/irs-pdf/f1040sab.pdf
instead of on Schedule A, the Itemized Deduction schedule. http://www.irs.gov/pub/irs-pdf/f1040sab.pdf
I’d suggest that you read IRS Publication 527 – Residential Rental Property.
And TaxMama’s RentalTaxes.com – where you’ll find answers to frequent questions – and links to forms and publications that can help you. http://rentaltaxes.com
And if you can, it would be worth so much to you to sit down with a good tax professional for about an hour or two to work out the best way for you to handle things. This will keep you out tax trouble – and they may even be able to help you with other things.
And remember, you can find answers to all kinds of questions about renting out your home and other tax issues, free. Where? Where else? At TaxMama.com
TaxMama Note: Remember, market cycles change. The last time we had a cycle like this, someone told me she was going to pay $1,500 to sell her home.
I advised her to keep the home and get roommates, instead.
She did. Instead of walking away and having to pay to sell her home (and move into some dump) – she now has over $250,000 of equity – after having pulled out over $200,000 for remodeling, trips and even plastic surgery.
She still has roommates, who cover all her expenses. And lives in a gorgeous home with a pool and resort-like back yard. That’s what happens when you don’t just give in to the poor market conditions.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- RentalTaxes.com :: TaxMama’s Home Ownership and Rental FAQs
- IRS Schedule A & B :: For itemized deductions
- IRS Schedule E :: Report your Rental Property Income and Expenses
- IRS Publication 527 :: Residential Rental Property