Renting Basement - To rent or not - tax and depreciation


C

Chris

I am trying to figure out the effect of depreciation
calculation when renting out my basement. Please bare with
me for this detailed explanation.

Recently I started renting out my basement. The basement has
1/4 of the area of the house. However, due to my huge
mortage, the rent I am getting will not cover the costs
(1/4th of mortgage + utilities etc). I understand that I
need to add depreciation (1/4 of the price excluding land
price, 27.5 years) also to the renting cost. This will end
up showing considerable loss on my rental account and on the
tax return.

Regarding monthly cash flow, I am benefitting from this
rental. But, is there an easy way to figure out if I will
end up ahead (benefit) or behind (loss) due to this renting,
if I happen to sell this house in next 5 or 10 years?

My concern is if I may not be able to get the full benefit
of the $5,00,000 tax break (Joint return). Is there a rule
of thumb calculation I could use? I will also appreciate any
resource or pointers.

Thanks for your time and valuable advice.

Chris
 
Ad

Advertisements


Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads

USA Rent tax 0
UK Renting in items to rent out 1
Avoiding tax on rent 8
Rent a room? 5
Rent Tracking 2
USA Free Rent & Deferred Rent Liability 16
Declaring rent for Tax purposes? 3
Buy to rent 4

Top