Condo Rental Tax Write-Offs

Condo Rental Tax Write-Offs

If you are considering buying a condo for rental purposes, keep in mind that different tax rules apply depending on whether you use the property personally and if so for how long.

If you rent for less than 15 days and used the property as a vacation or second home, the condo is considered a non-rental property, therefore you would not need to file a Schedule E on your tax form 1040.

However you may deduction on Schedule A mortgage interest, property tax and other home ownership deductions.

If you rent out your condo (2nd home) for more than 15 days and also use personally as a vacation home, the property is deemed both a rental and personal, requiring expenses to be divided between rental use and personal use.

If the property is considered an active participation for tax purposes the homeowner may deduction upward to $25,000 in rental property losses against earned income.

Active participation involves the taxpayer owning at least 10 % of the property and is personally involved in management decisions, even if the rental property is outsourced to a real estate rental agency.

High Income individuals may lose some if not all of this tax exception and therefore the losses would be considered non-passive income.

When rental income is considered passive, any losses only can be subtracted from other non-active gains.

I suggest if you are a high income earner and you are considering rental property, check with your tax professional to see how this investment will impact your taxes.

Above all, makes sure any investment you consider makes sound economic sense before making any purchases. Run the numbers on several properties to see which one offers the best financial profit.

Seek investment advice from a qualified real estate professional, you will be glad you did.

Daniel F Iuculano, AAMS CMFC

Accredited Asset Management Specialist

Chartered Mutual Fund Counselor

 

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