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I own a home but would like to rent it and lease a house in another town, what would my tax obligation?

what can I claim or deduct on taxes?
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Level 15

I own a home but would like to rent it and lease a house in another town, what would my tax obligation?

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Level 15

I own a home but would like to rent it and lease a house in another town, what would my tax obligation?

Typically, while it will generate a cash flow, long term residential rental real estate does not generate taxable income *ON* *PAPER* at tax filing time. Especially if you have a mortgage on the property. But you will have a tax liability when you sell the property, assuming you sell it at a gain.

But do understand that if the property is in a state like Hawaii that taxes personal income, The Hawaii GET tax will be assessed by the state every year and you will pay the state that tax every single year, on top of the regular income tax for your other "ordinary" income you will pay to both the IRS and the state.

 

 

Level 15

I own a home but would like to rent it and lease a house in another town, what would my tax obligation?

Level 15

I own a home but would like to rent it and lease a house in another town, what would my tax obligation?

Another thing to be aware of:

When you sell you principal residence, you are allowed to exclude the capital gain, from income.  That is, the gain (up to $250,000; $500,000 married) on the sale of your home is not taxable, if you owned and lived in the home for two out of the five years prior to sale.

 

If you rent out your home for three years after you move out, you will lose the right to exclude that gain.

 

 

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