What are the new (Trump) tax implications for renting out my home while renting another house for me and my family? I live in CA.

[briand1]

I own my home but want to move to a better location in the same city. If I rent out my home, and rent another home for me and my family for a similar amount would I need to pay more taxes (because of the rental income), or would the deductions for mortgage interest, property tax and depreciation cancel that out leaving me with the same tax bill? I did a rough calculation of the prop tax+depreciation+mortgage interest that looks like it mostly cancels out my expected rental income. I am especially interested in how Trump's new tax plan affects this situation, given that he is capping the mortgage deduction for a primary residence. 

[Anita01 · Accepted solution]

The new legislation would not affect you at all if you rent out the house.  There's no cap on the mortgage for a rental property, which is what you would be converting your former primary home to.  The mortgage interest and other expenses related to the rental are taken on Schedule E and not as primary residence interest on Schedule A.  

Since you would be renting your new place, you would have essentially no home-related deductions on your Schedule A at all, except for the part of the year before you convert the house to a rental.  You may revert to taking the new higher standard deduction because, with little er no home-related deductions for Schedule A, you may not have enough to itemize.

You would not owe more tax if, as you say, the rental expenses cancel out the income.

[briand1]

Thanks Anita!