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Level 2

Rental of Previous Residence

I retired in May 2019, moved to Florida and established residency there before the end of May. We still kept our home in Virginia that our adult son is living in.  In June I asked that he pay $700 per month "rent" to help defray the expenses of keeping the home while we figure out what to do with it. I have received 7 payments for months June to December 2019 and have paid the homeowners insurance, real-estate taxes, utilities.  In addition, I made repairs afterwards and replaced certain appliances.  The house mortgage is paid off. I knew the "rent" would not even cover half the expenses, so I am not deriving income and operating a "loss."  I will be filing a joint state return for Virginia since I worked and lived there through part of May even though my spouse did not earn income in Virginia in 2019. So do I need to start treating our former Virginia residence as rental property and go through the exercise of itemizing all the expense so that this can be entered into TurboTax under Rental Income? Yes, I see a recommendation to upgrade from Deluxe to Premier to make this easier. I hope I didn't get in over my head and make it harder on me to do my taxes when my intentions are to take care of my family.

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Level 15

Rental of Previous Residence

This can actually be simplified. You do not have a rental unit and should not report anything about this on your tax return. You simply have a 2nd home, that you are letting your son use and he is contributing towards the expenses.  

You do not have a profit motive.  Even if you filed as a rental, you would not be allowed to claim a loss, because of the "personal use" (relative renting at less than market value).

 

Since there is also no Virginia source income, a VA tax return is not required.

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Expert Alumni

Rental of Previous Residence

At first instance, it looks like a win win situation renting your house to your son. However, you have to be careful because renting your home to related parties at below market may trigger the reclassification of the rental property into a personal residence. This will cause the IRS to disallow the rental expense deductions

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Level 2

Rental of Previous Residence

So what is the right thing to do here in this situation? I am confused. Do I treat this as a Rental because I am receiving some income to help defray some of the expenses holding onto our previous residence by letting my son live there? Or do I treat this as Miscellaneous income because my objective isn't to have higher than market rental expenses for the deductions that may result on our Federal return? Then the next part is what do with the state of Virginia return since, if I treat the residence as a rental, then I assume Virginia requires a state return to be filed to determine if tax is owed unless there is a loss caused by expenses being higher than rental income.

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Level 15

Rental of Previous Residence

This can actually be simplified. You do not have a rental unit and should not report anything about this on your tax return. You simply have a 2nd home, that you are letting your son use and he is contributing towards the expenses.  

You do not have a profit motive.  Even if you filed as a rental, you would not be allowed to claim a loss, because of the "personal use" (relative renting at less than market value).

 

Since there is also no Virginia source income, a VA tax return is not required.

View solution in original post

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