I want to rent out my current home when I move in a few months. I know that I won't be able to get the rent I need to cover the mortgage, taxes and insurance. What do I do? Should I form an S-corp so I can deduct the losses?
2007-01-03 01:48:35 · 11 answers · asked by nickacarroll 2 in Business & Finance ➔ Renting & Real Estate
Previous comments were correct in that you do not need to form an S corp to deduct rental expenses. You do that on a Schedule E in your 1040 return. The gross rents less the gross expenses is either income or loss depending on the result of the computations. This may benefit you tax-wise but it will not help your monthly cash flow in supporting the debt versus the income.
If you cannot rent the property for a sufficient amount to cover the monthly debt I cannot see the benefit in retaining the property.
A previous responder also suggested the option of an interest only mortgage. This is an excellent option if the interest only payment allows the property to cash flow for you because you will be able to realize the tax benefit as well and is a option I would investigate in order to make an informed decision.
Finally, have you fully considered the responsibilities of a landlord? There is a lot more there than just collecting the rent. Are you prepared to deal with non-paying renters? You should have a reserve fund set aside to cover the expenses of mortgage payments and possible litigation should you have to evict. What about the possiblity of damage to the property? Are you a handyman type or are you going to have to hire someone to do necessary repairs? And, finally, heaven forbid, what if you end up with a tenant who looked like gold but turns your house into a meth lab? The abatement costs for that type of situation are horrendous.
I'm not saying any of this will happen but you should think about the worst things that could happen and be prepared to deal with them if they do.
Good luck
2007-01-03 03:01:37 · answer #1 · answered by Anonymous · 0⤊ 1⤋
You can deduct the expenses (taxes, insurance, interest expense on your mortgage, maintenance, and depreciation) without forming an S-Corp.
I can't say for sure that this will make it worthwhile to keep the house because I don't know all your details, but I do know it is a pretty common thing.
It is called a schedule E form for you taxes and any tax prepare should be able to help you with it... even H&R Block type companies.
Let's say you are charging $1000 per month... you will have to show that $12,000 (for the year) as income on your schedule e, but you will have expenses and depreciation as well. Any cost over and above your rental income is deducted from you earnings at your regular job (W-2).
I used to own one small house and did this kind of tax return the past 3 years, now I have a business partner and a few more porperties, but you can email me if you have any questions.
2007-01-03 02:08:48 · answer #2 · answered by John Stamos 3 · 1⤊ 0⤋
After the tenet's lease is up you raise the rent till you are able to make some kind of profit and then the tenet has the choice of renewing the lease or finding another place to live.
If they decide to move you can then advertise the home as for rent again or better yet sell it. Buy another house with the profits you made from your rental make some repairs and sell that one. In truth you would make more money to do that then rent.
About the S-corp thing you might want to check with an accountant and a lawyer.
2007-01-03 02:00:23 · answer #3 · answered by Anonymous · 0⤊ 0⤋
You do not need a S Corp just keep all your info deductions the expenses (taxes, insurance, interest expense on your mortgage, and depreciation) and file with you 1040...
2007-01-03 02:34:41 · answer #4 · answered by Anonymous · 0⤊ 0⤋
that is properly worth thinking a private enable (dealing with the valuables your self) as you purely have the single sources, even with the certainty that do not rule out an agent thoroughly. the internet is is your superb chum in the journey that your commencing out interior the valuables letting marketplace. look into web content like the single bellow as an occasion the place you could income from components and shared stories, besides as being a place to sell your residences availability. sturdy success.
2016-12-15 14:41:08 · answer #5 · answered by ? 4 · 0⤊ 0⤋
I am taking a loss on my house in Texas. If there is some way to deduct the losses, then I would like to know about it.
2007-01-03 01:50:44 · answer #6 · answered by RayCATNG 4 · 0⤊ 0⤋
Don't depend on the rent to cover ANYTHING. Worst case scenerio...you don't have a tenant and your left with the expenses anyway. Rental property, especially when you only have one...should be considered supplemental income and shouldn't be relied on.
2007-01-03 01:58:21 · answer #7 · answered by Miloree 2 · 0⤊ 0⤋
Hand the keys back to the mortgage company
2007-01-03 02:42:51 · answer #8 · answered by feeltherisingbuzz 4 · 0⤊ 0⤋
Sell your house is an option, or find other ways to rent out - multiple rooms iso the house.
2007-01-03 01:58:32 · answer #9 · answered by Martin D 3 · 0⤊ 0⤋
Either sell or refi with an interest only loan. The interest only loan will lower your payments significally, just make sure its not a negative AM. Meaning your principle will not go up during the loan period.
2007-01-03 01:59:14 · answer #10 · answered by angelonthesun 3 · 0⤊ 0⤋