Moved out Too Soon

Today TaxMama® hears from Elisa in the TaxQuips Forum with this question. “I purchased a home in 2009 getting a first-time homebuyers credit. I lived in it for 1 year.  I moved to be closer to work and am renting an apartment. I have been renting my house out since July 2010.  How will me renting out my house impact my taxes? Am I required to repay the monies received from the first-time homebuyer credit?


 Dear Elisa,

Ouch! I truly wish you had asked this question last year.  When you rented out your home in 2010, you terminated your right to the First Time Homebuyers Credit. (You had to live in the house for three years.) You needed to include the full repayment on your 2010 tax return. You will need to amend your 2010 tax return and pay it back, with penalties and interest.

I don’t know of any way around this. But, you might get the penalties waived, because the rules were complicated and confusing. If you are very persausive.  (I truly hope you mis-typed the year and you actually started to rent it out in 2011 – so you wouldn’t have to amend your tax return!)  

As to the impact on your tax return due to the rental? Well, you should already know this. Did you include your rental income on your 2010 tax return?  

Regardless, how will it impact you this year? Odds are, you will show a loss. You will report the rental income on Schedule E, page 1. You will deduct the mortgage, property taxes, insurance, and depreciation. If you’re paying any other expenses related to the property, you can deduct those, as well. Most likely, your rent is not high enough to cover them all.

As long you are earning less than $100,000, you will be able to deduct up to $25,000 worth of rental loss in any given year.  If your loss is greater than that (you should sell the house), the rest of the loss can be used in future years. 

For more information, please read IRS Publication 527 – Residential Rental Property.

And remember, you can find answers to all kinds of questions about rentals, homebuyers’ credits, and other tax issues, free. Where? Where else? At

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