- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Second Home with Not-For-Profit Income
I have a second home which I stayed in for 16 days. As such I believe the mortgage interest and property taxes are deductible in full. However, I also rented it out for 11 months at less than the fair market value (50%) as part of the purchase contract with the previous owner. As such, those are personal-use days. I believe I need to report the income from this as misc income/income from a not-for-profit activity AND I can deduct the utilities, mgt fees and repair bills up to the amount of the misc income. Any thoughts on this?
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Get your taxes done using TurboTax
That all sounds correct.
However, be aware that you must report ALL of your income, but the deductions are limited to the amount OVER 2% of your total income. In other words, the deductions for utilities, management expenses, and repairs may be significantly reduced or eliminated, but you will still be paying tax on the full amount of income.
As a side note, were you paying the utilities? Those are usually paid by the renter (but perhaps your contract says otherwise).
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Get your taxes done using TurboTax
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Get your taxes done using TurboTax
No, the $8000 of 2% expenses are NOT deductible.
Even though the Mortgage Interest and Real Estate Taxes are fully deductible, they still 'use up' the threshold for using deductions up to the income. In other words, because the Interest and Taxes were higher than the total income, nothing else is deductible.
- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Get your taxes done using TurboTax
My first year, 2016, I plan to treat as a 'personal use second home’ and treat the income/expense activity as a 'not for profit rental' Form 1040 21/23 misc
I'm going to report cost-share/rent received as "not-for-profit rental income on Form 1040, line 21" and report other rental expenses--not to exceed rental income-- subject to the rules explained in chapter 1 of Pub. 535, as miscellaneous itemized deductions on Schedule A, line 23, using the tiered application of expenses (Cat 1: Interest, taxes Cat 2: Insurance Condo Fees Cat 3: etc...).
The loan for the property is for personal use. I’m not planning on actively renting the property now or in the near future. We do plan to retire in about six years and will then either A) Occupy the property as our primary home indefinitely or B) Occupy/declare the property as our primary home until we can sell it and buy another (bigger) property in the area. For this reason, I’m not keen on declaring the property a rental and taking depreciation etc… which we really can’t do currently based on the ‘personal use’ definition.
We do itemize and our (total) deductions will exceed 2% AGI. My only goal here is to mitigate the taxes on my daughter’s cost-share/rent monies received by claiming rental expenses. The condo fee is $300+ a month, so hopefully the tiered approach/ 2% AGI will still provide some valuable offset to the income.
Am I missing anything? Thoughts? Suggestions?