Parking Space Rental

[beachnorwegian]

I rent out the sole parking space ($90/month) that came with the condo that I own.   Turbo Tax is asking me for the purchase price and closing costs details of my condo.  This seems a bit complicated to report income from a garage parking space that isn't even attached to my living space.  Is there a better way to report my $1,080.00 in annual income?  

[Critter]

Putting the rent on the Sch E is correct simply skip the asset section ... do not depreciate the "space" since it is really just land and land is not depreciated.  

[Anonymous_]

Personally, I would simply enter the amount as Other Income on my income tax return; it's essentially a not for profit rental.

See https://www.irs.gov/publications/p527#en_US_2018_publink1000219162

[Critter]

Really it is for profit since the income exceeds the expenses and although the "other income" is not wrong the IRS could question it since it is more than $400 ... leave it on the Sch E. 

[Anonymous_]

With all due respect, other income is simply ordinary income taxed at ordinary income tax rates.

As a result, I am not sure what the IRS could question since the only thing they could tack on would be self-employment tax and this income is clearly exempt from self-employment tax. 

[Critter]

I agree that it is simply rental income however any amount in excess of $400 in the other income section could be questioned by the IRS and even though the taxpayer would prevail why ask for any notifications. 

[Anonymous]

I would say that if the parking lot was inside the building, there would be depreciable cost associated with it.  On the other hand if on the ground outside the building it's non-depreciable land.  Even if it were inside the building, trying to come up with a cost, outside of getting an appraisal, would be virtually impossible.  (i don't think the IRS would buy allocating cost by using square footage of parking space to total square feet of unit and space).  Personally I wouldn't bother.   regardless of inside or outside allocable costs such as interest, taxes, hoa dues,  etc  would be deductible, but again the issue is how to allocate them.      i'm guessing that if it were depreciable and costs were allocated, you would end up with a loss each year.  this would create an issue, since the IRS could argue it's not for profit/hobby loss unless you could show there would be an overall profit upon sale of your condo.   This could be difficult be cause  you would have to allocate sales price and sales costs between the condo and rental space.   if you couldn't prove this and the IRS invoked hobby loss rules,  all allocated expenses would be disallowed except for those that could go on schedule A such as taxes and interest (for hobbies after 2018 all income is taxable but the expenses are not deductible  (hobby expenses prior to 2018 went on schedule A but the deduction was eliminated in for 2018-2025).

so in summary what would i do.   report the rent on schedule E and just deduct on schedule E just direct expenses (ie expenses that you could show relate only to the parking space)  this is no problem if you just report the income on line 21 of schedule 1.  

[Carl]

Your use of the word "garage" indicates a parking space enclosed by a structure. If that's the case, then that structure has value (as does the land under that structure) and you are required to depreciate it. Now wile I don't disagree with any of the other comments in this thread, I myself would report my ownership of that structure and depreciate it over 27.5 years. Here's what you have to look at in making a determination.

Generally with a condo unit (including the garage) what you actually own is everything from the sheetrock, in and everything on top of the floor joists. You do not own the floor joists or the studs behind the sheet rock. You also don't own the roof. So for example, when the condo building needs a new roof in 10-15 years, the cost of that roof is already included in your monthly condo fees. If not included, (which is not common) then you'll be "assessed" a cost when a new roof gets put on, just as all the other condo owners in your building will be.

If there's a fire the condo association has basic insurance that covers the overall structure. Your insurance covers everything from the sheetrock, in and the floorboards, up to the top of the sheet rock on the ceiling.  If the roof leaks, your insurance covers the sheet rock. The condo association's insurance pays to actually fix the leak in the roof and to repair any other water damage that may have occured above the sheet rock on the ceiling.

So in your case for the garage, you actually "own" structural material and if you don't depreciate it, when the IRS questions you on it it's a 50/50 shot weather you'll will or lose the argument. So avoid the argument altogether and deprecate it.

[Anonymous_]

---

@Carl wrote:

...I myself would report my ownership of that structure and depreciate it over 27.5 years. Here's what you have to look at in making a determination...

---

I would use extreme caution before taking depreciation deductions on a structure of the type that is the subject of this thread. Actually, what the original poster should be looking at are the governing documents of the condominium association (the CC&Rs and the condominium map/plan). 

It is quite typical that condominium parking spaces, including garage parking spaces (and surrounding structures)  constitute "common elements", either general common elements, limited-use common elements or exclusive-use common elements. In any event, if the space falls into one of those categories, then there is only a right-to-use the space.

[beachnorwegian]

I really appreciate everyone’s thoughtful replies.  Yes, the parking space is on the 3rd floor of an enclosed 5-story parking garage.  The parking space was not recorded in the deed and I recall my attorney stating that the association could technically reassign me to a different parking space at its discretion.  He said the condo docs (?) only specified that the unit includes the use of one space in the garage.  

I’m not looking to minimize taxes on this income.  I’m looking to report it in the least onerous way.  

[Critter]

I still think it belongs on the Sch E  and you have nothing to depreciate ... skip the asset entry section completely.