RE: Income reduction from rental property

From: Rick.Schafer@bdk.com
Subject: RE: Income reduction from rental property
Date: Mon, 3 Aug 1998 13:09:37 -0400

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To make a small correction to this discussion...

>
trinh@anywhereusa.com asked:
>           
>
>I bought a house recently, and am now living with my parent 
>and relatives.  If I move out (may be out of state) say, for 
>a new job, I will most likely need to pay at least $300 out 
>of my pocket each month to cover the mortgage because they 
>can't afford it. I don't think i can kick them out without 
>breaking the relationships, so this isn't an option for me.
>
>My questions are:
>1. Will I still be eligible for getting a tax break if I
>   don't live there ?

Lynn R. Davis responded:

>>Yes, and you have two choices.  You can charge those who do live there 
>>"rent" (which you have to recognize as income) and then take ALL 
>>expenses (including insurance, depreciation, repairs) as deductions 
>>(and possibly have a net loss to charge against other income).

[> ]  My comment.  Unfortunately, you cannot charge your rental income loss
against non-rental income.  This I understand was taken away in the Reagan
years.  If you own and rent out 1 property, and take your expenses (including
insurance, depreciation, repairs, advertising, mileage, agency fees, lawn care,
etc) as deductions, you can only go down to $0 rental income.  Your regular
income (from your job, other investments etc) cannot be reduced by a rental
loss.  If you own more than 1 rental property, you can charge a loss on 1
against a gain on the other.  In other words, you can look at your rentals as a
pool, and take all your income and all your losses together.  But if you have a
net loss, you cannot apply that loss to income from a non-rental source.

Standard disclaimer: I'm a tax payer -- not a tax advisor.


Rick Schafer




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