Tax Year Prior to 2020: Passive Rental

[amosij]

I own a house in WV that my son pays the mortgage. Do i need to file a WV tax? In turbo tax it had me list the payment in other income not rental income so i cannot deduct any repairs. 

[Irene2805]

You should claim your rent as "Other income."   According the IRS, "If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year."

NOTE:  . 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.

You can enter your rent and also the repairs as Miscellaneous Income.  Please follow these steps:

1. Click on Federal > Wages & Income [In TT Self-Employed:  Personal > Personal Income > I'll choose what I work on].
2. Under Less Common Income, click on the box next to Miscellaneous Income, 1099-A, 1099-C
3. On the next screen click on the box next to Other reportable income.  
4. Answer Yes to Any Other Taxable Income?
5. Follow the instructions on the screens.
6. Once you have entered the rental income, you will be brought to the Other Miscellaneous Income Summary.
7. Click Add Another Income Item.  
8. On the Other Taxable Income screen, enter the repairs as a negative number.  Remember, your repairs cannot exceed he amount of rent you collected.

For more information, please see IRS Publication 527 -  Residential Rental Property

[amosij]

I was asking what i need to report to WV?

i understand the federal.

[amosij]

In turbo tax when i input the rental it redirected me to other income and said i could not claim expenses as family lives there. Where can i claim repairs?

[Carl]

You should claim your rent as "Other income."

...and if you do that, you can not deduct "any" expenses against  that income. *Not* *one* *single* *penny*.

According the IRS, "If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income

So that doesn't make it "other income". It's still rental income and it still gets reported on SCH E. But if you are not renting the property at FMRV then you must indicate that when asked about it in the program.... especially if you are renting to family. Then the program will not allow you to deduct any losses that exceed your rental income. You can "claim" all the losses you want. But once your taxable rental income reaches zero (and it will, I guarantee it) no more losses are allowed and you are "NOT" allowed to carry forward losses either. This has the potential to hurt you big time, in the tax year you sell the property.

[tagteam]

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@amosij wrote:

In turbo tax when i input the rental it redirected me to other income and said i could not claim expenses as family lives there. Where can i claim repairs?

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You cannot deduct any rental expenses if you are renting to a family member unless the family member uses the property as his/her primary residence and pays fair rental value.

Otherwise, every day is counted as a day of personal use; you can only deduct mortgage interest and property taxes.

See Section 280A(d)

[JamesG1]

Are you a WV resident or non-resident?

Are you using the method recommended by irene2805?

Are you showing a gain?  If there is a gain, I assume that WV would expect you to report WV sourced income.

See here.

“WEST VIRGINIA SOURCE INCOME

The West Virginia source income of a nonresident is derived from the following sources included in your federal adjusted gross income:

Real or tangible personal property located in West Virginia;”

[amosij]

Non resident

[amosij]

What if I rent it to my son just for the mortgage amount which is way less than the average rent in his area? Less than fair market rent 

[VictorW9]

You have to be careful because you'll lose some valuable tax deductions. What will happen is that you will not be able to claim a loss and can deduct your rental expenses only up to the amount of your rental income.

[Edited: 2/16/2020 | 02:31pm]

[tagteam]

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@amosij wrote:

What if I rent it to my son just for the mortgage amount which is way less than the average rent in his area? Less than fair market rent 

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If you go that route, then you have to treat the property as a second home; you can deduct mortgage interest (with certain limitations) and property taxes (subject to the SALT limitations) if you itemize your deductions on Schedule A. 

You cannot deduct any of the ordinary and usual rental expenses (e.g., utilities, insurance, repairs).

[amosij]

Thanks

i had ask the wrong question. 
Its not a rental just a second home that he lives in reimburses me the mortgage cost

[olorone]

Can I deduct $21000.00 for repair to and replace a  rotten deck?

[DoninGA]

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@olorone wrote:

Can I deduct $21000.00 for repair to and replace a  rotten deck?

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The deck replacement is an improvement to the property and has to be entered as an Asset to be depreciated at the same recovery rate as the residential rental property, 27.5 years.