What are the tax breaks I’ll lose if I rent out my house instead of living there myself?

Asked by Martha

2 Answers

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Answered by Kim Miller, CFP®PRO+ in Redmond, WA
Good question. You may actually gain tax benefits by renting out a home. You can deduct some of the same expenses on a rental property as you do now: property taxes and mortgage interest. You also take deductions for insurance costs, maintenance, property management fees (if you pay someone else) and depreciation - depreciation is a non-cash expense which means you get a tax deduction without having to put out additional funds. Essentially your house moves from Schedule A of your tax return to Schedule E: allowable deductions for a rental property are taken against rental income received. Assuming you end up "even" - i.e., rents and deductions are a wash, you pay no additional income taxes on the rents. And the best thing about rental properties? O.P.M. - Other People's Money is being used to pay for your property! The rules regarding rentals are not for do-it-yourselfers when it comes to your tax return - hire a CPA to take care of your tax return. Good luck! | 09.15.14 @ 20:10
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$commenter.renderDisplayableName() — {comment} | 12.05.16 @ 04:27
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Answered by Josie
This is a good explanation. However, be aware that renting out a home in Indiana will cause the owner to forfeit the $45,000 Homestead Deduction, which may double your property taxes. However, the new, higher property taxes are still deductible on Schedule E. I am a property manager and this has happened to several of my homes. | 09.18.14 @ 14:34
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$commenter.renderDisplayableName() — {comment} | 12.05.16 @ 04:27
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Answered by

Kim Miller
Kim Miller, CFP®PRO+ in Redmond, WA

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