I have a condo that I live in for 6 months last year and rented to a friend for the other 6 months. What are the tax implications of claiming the rental. Considering my friend paid less than my total costs, so it qualifies as rental-not-for-profit. What are the pros/cons of regular rental property claim versus rental-not-for-profit? I believe there are some differences in terms of depreciation, deducting assessments, and tax basis on sale. I plan to sell my condo this year, so there would be approximately 1 year of rental.
2007-04-05 12:43:05 · 2 answers · asked by MO 1 in Business & Finance ➔ Taxes ➔ United States
When it comes to a property that you live in part-time, there are major tax implications to the decision of how to treat it from a tax perspective. I don't believe you have a choice--you received income from your friend. The only difference is that if the property is truly a rental, you can get tax breaks to offset that income. There are special rules about how many days you may use the property yourself vs how many days somebody paid rent for it. And, the implications are long-term since if the property is a rental, it may not qualify as a personal residence for capital gains purposes. This isn't the place to get tax advice, just the place to get some basic info so you can do the research or consult a tax accountant.
2007-04-05 12:50:28 · answer #1 · answered by Still reading 6 · 0⤊ 0⤋
It can't qualify as "rental-not-for-profit" for one simple reason. As far as the IRS is concerned, there is no such thing. Even if I'm wrong on that point, you don't have a choice how to treat the property. ALL rent you receive must be declared as income. Certain expenses related to the retail can be deducted up to the amount of the rent. Passive Activity rules prevent you from claiming a net loss. The IRS page below may help.
2007-04-05 13:37:11 · answer #2 · answered by STEVEN F 7 · 0⤊ 0⤋