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LoganLee
Returning Member

Just married and my wife still owns her previous home

My wife and I were recently married. This is the first year we are going to be filling together. She moved in with me. She kept her previous home and sublets it to her 25-year-old son with a roommate. They pay her rent to stay there because she still has a mortgage on it. I've been filing my taxes myself for 20 years now, but this is all new to me. Wasn't sure if her home is considered a rental property now? Is it just 2 homes, is there something you do when you live at one but just own the other and a family member lives there instead? Wasn't sure how to handle property taxes…etc. If in this situation, you file married jointly or married separately? Any advice before I get started would help. I'm tempted to just pay to have it all done this year, but I rather learn if it's not too difficult of a situation to continue to do myself.  Thanks!

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5 Replies

Just married and my wife still owns her previous home

It is not just a second home if she is collecting rent. How much rent she collects determines whether or not it is a rental.

 

A Not-for-Profit rental does not charge full rental value. It generally relates to a family member staying there and helping to cover the costs. The rent received is income.

 

Not Rented for Profit

 

If you don’t rent your property to make a profit, you can’t deduct rental expenses in excess of the amount of your rental income. You can’t deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

 

Where to report.

 

Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8j. If you itemize your deductions, include your mortgage interest (if you use the property as your main home or second home), real estate taxes, and casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.

 

Presumption of profit.

 

If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit.

 

For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Pub. 535.

 

A rental is when it is rented at full rental value, the same price you would charge anyone off the street. The intent is to make a profit, whether or not you actually make one. Almost all expenses of producing income are deductible.

LoganLee
Returning Member

Just married and my wife still owns her previous home

She only has him pay her the cost of the mortgage payment. They amount that's due each month to the bank. Nothing more.

Just married and my wife still owns her previous home

Then it is a Not-for-Profit.

 

Enter it as Other Income.

  • Wages & Income
  • I'll choose what I work on
  • Less Common Income select Start (or Update) for 
  • Miscellaneous Income.
  • Other reportable income and you can enter your own description(s) and amount(s).

 

 

LoganLee
Returning Member

Just married and my wife still owns her previous home

What about the areas where I enter my property taxes and such. How do I handle second property taxes, and is this all entered the same regardless of whether we are filling jointly or separately? is 1 best in this situation?

Just married and my wife still owns her previous home

For this purpose, these are treated as your second home. The mortgage is added separately with the main home mortgage and the taxes are entered separately with the main home taxes.

If you filed separately, she would get these deductions. If she itemizes, you will also have to itemize. You will lose your standard deduction. 

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