What is the US tax ramification of tearing down rental property that I own and building my home on that site?

Question

An individual owns rental property. He wants to tear down the house that he rents out and build his primary residence on the same land. Is this essentially a conversion of rental property to personal property? Is he entitled to a loss on the rental property? What are the U.S. tax ramifications of this situation?

Answer 1

From a real estate tax perspective, the applicable tax rate will be on assessed value which may means that taxes could potentially go up. As a home owner, you will be able to expense the interest expense on the loan in your tax returns while as a renter, you cannot expense the rent.