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!
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.