Rental income is total rent minus mortgage payment correct? Or do I just list total rent collected then ithe program will ask about mortgage later?

[LeslieB]

Your interest is deductible as an expense, but the value of your home minus the value of your land is depreciated.  This is why you do not deduct the principal.  By deducting the principal and taking depreciation (if you're taking depreciation), you are overstating your deductions and a) underreporting your income and/or overstating your losses.

IRS Publication 527  states:

?Interest expense. You can deduct mortgage interest you pay on your rental property.

Types of Expenses

Listed below are the most common rental expenses.

Advertising.

Auto and travel expenses.

Cleaning and maintenance.

Commissions.

Depreciation.

Insurance.

Interest (other).

Legal and other professional fees.

Local transportation expenses.

Management fees.

Mortgage interest paid to banks, etc.

Points.

Rental payments. (this refers to items you rent for business use)

Repairs.

Taxes.

Utilities.

I would recommend you speak to a CPA or Enrolled Agent who can help you to correct your prior year returns. We have a service called CPASelect where you can work with someone one-on-one.
Link:  https://turbotaxcpaselect.intuit.com/

You have two issues a) prior reporting that is incorrect and b) the impact to your net profit or loss upon the sale of your property.

I hope this helps. ~Leslie

[helgy]

We don't have a mortgage on our vacation rental.  We don't pay any interest on our vacation rental.  My rental expenses are limited to my rental income.  Someone else asked the question and they were told it's because they aren't an active participant.  We are an active participant so it shouldn't be limited.  Our rental income was given to us in a 1099 Misc from our property management company.  What do I select in Turbo Tax so my rental property expenses are't limited?

[jmcfadden]

this was a question i was pondering too, can it please get answered?

thanks

John

[jmcfadden]

did this question ever get answered, please link to it

I have a house that was underwater but i decided to hold it. I rented it but for only a few thousand dollars of Real income above what the mortgage and insurance and tax

if i am truly paying tax on the entire amount i receive minus morgage interest , tax etc then I might as well just sell it, right?

John

[ReginaM]

You are allowed to deduct ordinary and necessary expenses required to manage, conserve, or maintain property that you rent to others. You're allowed to deduct these expenses if your property is vacant, as long as you're trying to rent it.

Expenses must be deducted in the year they are paid. For example, if a pest-control company serviced your rental in 2019 but you didn't pay them until early 2020, you'd deduct that expense on your 2020 tax return.

Deductible expenses include, but are not limited to:

• Cleaning and cleaning supplies
• Maintenance and related supplies
• Repairs
• Utilities
• Insurance
• Travel to and from the property
• Management fees
• Legal and professional fees
• Commissions
• Taxes and tax return preparation
• Lease cancellation costs
• Advertising
• Real estate taxes
• Mortgage interest

Your home will be depreciated over its useful life rather than deducting your mortgage payment.  Depreciation is calculated at the property value less the value of the land (land is not deprecable) spread over the useful life of the property.  The original cost include the purchase of the property and capital improvements made to the property.  

See IRS Publication 527 for more information.

@jmcfadden

[jmcfadden]

i have some serious things to consider on this little rental house then. thank you

[ReginaM]

You are welcome!

[Don-F]

So for ur example, the $200k restoration plus the house value portion the &200k purchase (probably about half, best to get ur county tax records & discuss with tax professional), u end up depreciating approx $300k over ~35 years. If/when you sell, you’ll need to recapture the total amount deprecated against the sale price (ie, it will decrease the cost basis, hence increase the profit subject to capital gains tax on the sale).

the upshot of this thread:

Re: Rental income is total rent minus eligible (ie, tax deductible) business expenses to manage & maintain the property. Never mind mingling in the “mortgage” payment—that just clouds the discussion!

HTH!

[Wiley53]

Please help by simple explanation. I pay $1800 monthly for property and renter pays me $1000 month.  12k is considered income even though it doesn't even let me break even.  IRS lets me deduct mortgage interest, big deal. 

How do I profit? Housing market is much lower than upon original purchase.

[ColeenD3]

Many landlords do not show a profit, but this is mainly due to depreciation. However, you should at least charge as much rent as covers your mortgage interest and property taxes. If you are charging what the market will allow, then that is the best you can do. If you are charging less than full rental value, you do not have a business. You would file a Not-for-profit rental.

You would enter your gross rent as income and then subtract all your expenses, including depreciation. You can take a loss against other income up to $25,000 if your income is under $100,000.

[JoshuaColon]

you paying down your mortgage with this rent and you are getting equity out of it. You are not getting cash flow. But you still making equity