Tax Question- Rental Property

The Coffee Shop
1

Sorry to disappoint you that this isn’t a post about Obama or Gitmo but, I have a tax question for you tax gurus:

Background:
I currently own a house that is being rented (call it house A) that I moved out of on July 1, 08. I also own the current house I live in (house B) that I closed on on May 7, 08.

Question:
Is house A considered a rental property for this past tax year since I lived in for 7 months? Also, what can I deduct for mortgage on house A? More specifically the rental income is $1300 while the mortgage I pay is $2000. Is this $700 difference considered a ‘loss’ and thus deductible as well? I know my deductions with house B are pretty straight forward, given that is my primary residence.

Any advice would be greatly appreciated!

Thanks

2

House A offically became rental property on July 1. You can take 6 month of depreciation and other upkeep expenses as rental expenses.

No, the entire mortgage is not rental expense. Only the interest and taxes part. Also you can take the insurance premiums for the the last half of the year as rental expenses.

These are reported on schedule E.

3

Thanks. In regards to the depreciation: is that the actual market value change or a %of the sale price in respect to the amount of time being rented? The reason I ask is that the house value (believe it or not) actually increased in value of the past year.

4

Thanks. In regards to the depreciation: is that the actual market value change or a %of the sale price in respect to the amount of time being rented? The reason I ask is that the house value (believe it or not) actually increased in value of the past year.

%of the sale price in respect to the amount of time being rented, sort of. You can only depreciate the value of the building not the land, so you have to make a reasonable guess about the land cost and then subtract that from the value you depreciate.

It would be nice if we could take “writeoffs” like corporations when the value of our assets plummet, but depreciation for rental property is strictly straight line based on what you payed for it.

5

I’m in a remarkably similar boat, with the exception that we don’t own the house we’re in now. TurboTax has been a huge help- I’m waiting for the final updates to send my return in.

6

Don’t forget the portion of your cell phone bill that you use for business, mileage to and from the property (everyday,you need to keep an eye on the building), portion of your internet service, what about a new camera to take pictures before and after the tenants move out?