Renting my personal residence, not a second home


N

nickravo1

If I stay in my personal residence for more than 14 days in a tax
year, and rent it out for four months while I live abroad and travel,
do vacation home or personal home rules apply in terms of treating the
rental income?
 
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P

Paul Thomas

If I stay in my personal residence for more than 14 days in a tax
year, and rent it out for four months while I live abroad and travel,
do vacation home or personal home rules apply in terms of treating the
rental income?



What rules apply would limit your losses. So worst case is you break even
for tax purposes.
 
D

D. Stussy

Paul Thomas said:
What rules apply would limit your losses. So worst case is you break even
for tax purposes.
Except for items otherwise allowable to you on Schedule A, you won't have a
loss.
 
N

nickravo1

Except for items otherwise allowable to you on Schedule A, you won't have a
loss.

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Do I pro rate my expenses on Schedule A? If so, how? I lived in the
house 48 days; rented it 62 days; it was listed as available for rent
and empty for 60 days; under contract to lease and empty for 30 days
and empty and offered for sale without being used personally for 164
days. Is there a formula?




========================================= MODERATOR'S COMMENT:
- please trim the post to which you are responding.
 
R

removeps-groups

See http://www.irs.gov/publications/p936/ar02.html#d0e537

I'm guessing that your main home becomes a second home when you travel
abroad as you are not using it as your main home. Maybe you're
staying in another home, apartment, or hotel while abroad. But when
you move back into it, it becomes your main home again.

<Quote>

More than one second home. If you have more than one second home,
you can treat only one as the qualified second home during any year.
However, you can change the home you treat as a second home during the
year in the following situations.

- If your main home no longer qualifies as your main home, you can
choose to treat it as your second home as of the day you stop using it
as your main home.

</Quote>

This means that your home is a qualifed home and you can deduct
mortgage interest and property tax on Schedule A. But I'm not
completely sure, as publication 936 does not have a section on primary
home rented out.

Do I pro rate my expenses on Schedule A? If so, how? I lived in the
house 48 days; rented it 62 days; it was listed as available for rent
and empty for 60 days; under contract to lease and empty for 30 days
and empty and offered for sale without being used personally for 164
days. Is there a formula?
It appears the home was available for rent 62+60+30=152 days (even
though it was empty for 90 of these days). So if you lived in the
house for more than max(14, 0.1*152)=15.2 days, then it is a qualified
home. You lived in the house 48 days.

On Schedule E you would have to deduct depreciation for 152 days. I'm
not sure if you have to take depreciation for 5 months or 152 days
though. But all the mortgage interest and property tax would be on
Schedule A, so wouldn't appear on Schedule E. On the other hand, it
might be better to treat the home as non-qualified for the time that
it was available for rent because that would move some of the property
tax and mortgage interest to Schedule E where it would not be subject
to the itemized deduction phaseout and AMT, and even if you didn't get
to deduct the loss, it would get carried over till when you turn a
profit or sell the house.

I'm not sure if the 25k loss is reduced the rental is for part of the
year. Seems that it should be.reduced to 152/365*25000=10411.
 
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D

D. Stussy

See http://www.irs.gov/publications/p936/ar02.html#d0e537

I'm guessing that your main home becomes a second home when you travel
abroad as you are not using it as your main home. Maybe you're
staying in another home, apartment, or hotel while abroad. But when
you move back into it, it becomes your main home again.

<Quote>

More than one second home. If you have more than one second home,
you can treat only one as the qualified second home during any year.
However, you can change the home you treat as a second home during the
year in the following situations.

- If your main home no longer qualifies as your main home, you can
choose to treat it as your second home as of the day you stop using it
as your main home.

</Quote>

This means that your home is a qualifed home and you can deduct
mortgage interest and property tax on Schedule A. But I'm not
completely sure, as publication 936 does not have a section on primary
home rented out.
There's a reason for that. See below.
It appears the home was available for rent 62+60+30=152 days (even
though it was empty for 90 of these days). So if you lived in the
house for more than max(14, 0.1*152)=15.2 days, then it is a qualified
home. You lived in the house 48 days.

On Schedule E you would have to deduct depreciation for 152 days. I'm
not sure if you have to take depreciation for 5 months or 152 days
though. But all the mortgage interest and property tax would be on
Schedule A, so wouldn't appear on Schedule E. On the other hand, it
might be better to treat the home as non-qualified for the time that
it was available for rent because that would move some of the property
tax and mortgage interest to Schedule E where it would not be subject
to the itemized deduction phaseout and AMT, and even if you didn't get
to deduct the loss, it would get carried over till when you turn a
profit or sell the house.

I'm not sure if the 25k loss is reduced the rental is for part of the
year. Seems that it should be.reduced to 152/365*25000=10411.
There is no $25k loss allowance here. It's his primary residence for which
he was TEMPORARILY away and rented it. Section 280A limits apply before one
gets to the passive loss rules of section 469. Furthermore, see 469(j)(10)
which pretty much kills the allowance.
 
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