How would my taxes be affected by renting a house out before selling it? Can I claim the repairs I made?
I purchased a new house. So, I put my first house up for sell. In the interim, I rented the house out. I made repairs in the house for about 0. The house was sold seven months late. What deductions can I take for this year?
Tags: first house, interim, seven months
March 28th, 2010 at 10:04 pm
It depends what your tax bracket is based on your income from your job. Normally you can take a write-off if you rented it as a loss and there were repairs made on it. Although there is a ratio that you have to consider. There might be a certain percentage of time required that a renter has to be in your house during that year to qualify. If you made a profit from the renters you have to pay taxes on the income but all of it is based on your personal income tax bracket. I would talk to your tax man because he would know your history. good luck
March 28th, 2010 at 10:04 pm
Keep the receipts and you can deduct them as improvements. You also get to deduct the fees, taxes and points paid while selling it. To offset the rental income – you maybe able to depreciate the house too.
March 28th, 2010 at 10:04 pm
You must report the rental income from the house on Schedule E. You can take deductions for the repairs you made and depreciation, as well as any other expenses you paid for the tenants (property taxes for the portion of the year you didn’t live there, utilities, or anything else the tenants didn’t pay themselves. Note: before expensing property taxes, make sure you don’t include any portion reimbursed by or charged to the buyer of the home when it was sold). Save all receipts!
Note that depreciation will reduce the cost basis of the home when it comes time to report the gain/loss on the sale of the house on your tax return. If this was your primary home for 2 out of the last 5 years, and you don’t plan on selling your new home within the next 5 years, you can exclude up to a $250,000 gain if single or $500,000 if married, so unless you’re recognizing a huge gain on the sale, the depreciation is probably worth taking.
Consult with your tax advisor before making a decision on how to report these transactions on your tax return. They can guide you best.