Filing my taxes and tenant affecting me because I own property?
Is anyone here an accountant or is familiar with how they file their taxes if owning property? Currently I own a condo with only my name on the deed, and my gf lives with me paying her half of the mortgage which is usually a monthly check towards my name. My brother has told me…
Is anyone here an accountant or is familiar with how they file their taxes if owning property?
Currently I own a condo with only my name on the deed, and my gf lives with me paying her half of the mortgage which is usually a monthly check towards my name.
My brother has told me that since that is the case, I will be considered the landlord and she a tenant – and that when I file my taxes the gov’t will take more from me.
Is this true? Is there a workaround to this – like having her check go towards the bank (and not me) to pay the mortgage?
Was bored for a couple of hours yesterday, so looked at some IRS fact sheets. Free tax advice is worth exactly what you pay for it. In some instances the IRS will assess income, but not allow expenses (e.g. if your employer pays “rent” for the portion of your house that is used as a home office).
If you are receiving payments from someone for living in your house, make sure you discuss the situation with a qualified tax accountant or attorney. It is not worth running afoul of the tax law to save a few dollars. Actually you should discuss all payments (cash or in-kind) that you receive with your professional tax advisor.
No, you can’t operate a business just to generate a loss, but you can operate businesses that do make losses, even for several years, or most years (i.e. a commercial airline). If what you are doing is a hobby, then you don’t earn income and can’t deduct the expenses (although the mortgage interest is deductible).
The IRS can’t have it both ways, tax the income and refuse the expenses.
In all likelihood, a girlfriend/boyfriend contributing to household expenses is not a tenant and the cash inflow is not income, nor are there any deductions relating to services provided to that person.
If the roommate relationship is conducted in a business like manner, evidenced by an agreement, rent receipts, appropriate accounting records relating to maintenance etc. then the relationship is more like a business relationship. Just because you live in the house does not mean that renting rooms is a hobby – most bed and breakfast places are businesses and will be paying federal, state and local taxes. Whether a particular arrangement is a business or not will depend on the facts of the case.
The IRS is not the ultimate arbiter of these things, the Supreme Court is. The IRS does occasionally lose cases.
When in doubt consult a tax attorney. Unless you are operating a multi-million dollar business and can afford to fight a case with the IRS, don’t get too creative.
Something is not adding up about this whole scenario. Real estate is a business. The government does not allow you to operate a business just to generate business loss for tax purposes. I was told five years and NYS considers this a hobby rather than a business.
In my coop I am technically an owner and a renter, why can I only deduct certain items instead of all operating expenses. Why hasn’t my very smart tax accountant ever suggested this before I married my “tentant” ?
If anyone speaks to an accountant with info about this, please post.
When I had my roommate in the condo, I calculated how much space was his exclusively (his bedroom), how much was mine exclusively (my bedroom) and how much was shared (everything else). You can develop a formula easily enough: (no of square feet exclusive to tenant + 50% of common area)/total square feet.
In my case it worked out at something like 37% of the expenses of running the condo could be deducted, and because I had a heavy duty mortgage I made a loss. I also made a capital loss when I sold the place.
It is extremely important to keep accurate and detailed records in case you are ever audited.
Anybody want to further explain – with an example with figures? Like how you decide what part is rented when you share the place with a partner or roommate? And is this actually considered rented? I’m curious.
Tax losses only occur if there are depreciation expenses and/or the mortgage (and therefore the interest), property taxesa and maintenance, are so large that the expenses exceed the income.
>Please explain how one could create a loss by charging rent.
Quite normal. Depreciate the part of your property that’s rented, pro-rate mortgage payments, insurance, utilities etc which come off of the rent, and you’ll wind up with negative income. Of course, when you sell the place you’ll be dinged with the back taxes on the depreciation.
Please explain how one could create a loss by charging rent. My very expensive accountant never mentioned anything like this and he knows everything.
I have never heard of anyone doing this.
Thanks for the advice, I’ll check with my tax accountant and see what he says.