questions about taxes on rental
We are buying a 2 family brownstone and renting the top floor apartment to my sister. Does the fact that she is a relative at all impact the tax situation? Do we still have to claim the income or is it different if she is related to me? Also, if we rent it out to…
We are buying a 2 family brownstone and renting the top floor apartment to my sister. Does the fact that she is a relative at all impact the tax situation? Do we still have to claim the income or is it different if she is related to me?
Also, if we rent it out to her or anyone else for a few years, claiming the income, and then we start making enough money to stop renting it and start using the whole house for ourselves, does that help us when we sell as far as this whole depreciation tax stuff I have read a bit about? I am confused about that bit.
Thanks so much.
am i the only US citizen willing to hide a little income..anyone who’s ever filled out a long form or claimed deductions has broken the law, plain and simple. Nobody’s return is 100 percent accurate. so, whats the fault in hiding a bit of rental income.
Yep, talk to a decent accountant. Money very well spent.
There’s several reasons to do the legit thing and claim the income – one is you might be better off that way.
The rent is income but deduct from that all related expenses like heat, repairs, electricity, pro-rated mortgage costs for that part of the house – and depreciation.
Your accontant can tell you more but if you depreciate part of your house and then move back into it, as you’re planning, that depreciation can be waived after a few years * putting your cost basis back to normal.
* I’m not an accountant. I just play one on tv. Talk to a real one.
You absolutely MUST get an accountant. Your days of filing a simply 1040 are over. There are major deductions (such as depreciation) that you lose if you don’t take, and that will bite you back later for having not taken. Suck it up and get an accountant, and he/she will explain all of this to you.
Sorry, I did not realize you wished to break the law and commit tax fraud. By all means, go ahead and take above poster’s advice and screw all honest tax paying citizens to your advantage. I mean, if you don’t get caught, it isn’t really breaking the law is it?
you said she’s your sister right..? so, she won’t mind paying you with ‘johnny cash’. oh yeah, what rental income were you referring to mr taxman?
Talk to your accountant about the well known sister rental income exemption
Nope and Yep… as long as she makes money and pays her own taxes and you don’t support her.
It doesn’t matter that she’s a relative as long as she’s not a dependent. If she’s paying you rent which goes toward your mortgage, then it is income. She is a separate tax entity from you so your relationship with her is business in the eyes of the IRS. Just keep business business and family family and document it as if you were renting to any other renter. Only thing is be sure to keep her space separate. The IRS will only let you deduct portions of your house if they are used exclusively for “business” purposes (ie: rental unit).
The good news is that you get a ton of tax deductions for costs involved with your “business” of renting to her, which help offset the additional income declared.
Look it up on nolo.com – they have a ton of information and books about the subject.
Rental income is income no matter who you rent to ,and you must claim it .
Your second question .Once you start using the whole house for yourself then you don’t claim any income on the unit .