AboutJohn Stancil, CPA Expertise I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Society of Tax Professionals, and the Institute of Management Accountants.
Experience I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper.
Expert: John Stancil, CPA Date: 7/15/2008 Subject: Primary residence as a rental
Question John,
Thanks in advance for your advice. My wife and I recently relocated to California for a two-year work assignment and fully-expect to return to NY. While renting here in California, we are interested in renting our home in NY (suburbs) until we return. We have owned the home since 2005.
Would our home qualify for "primary residence with intention of returning" status and allow us to take itemized deductions for mortgage interest and taxes?
Secondarily, it is very likely that rental income will be less (by $400/mo) than our mortgage, home equity and home owners dues. Similar question - if we claim "not for profit rental," can we take the full mortgage interest and taxes deduction, even if it exceeds the amount of rental income?
Thanks for your perspective.
Answer Matt,
Thanks for your question.
First, to my knowledge, there is no official status "primary residence with intention of returning."
If the rental is not for profit, you report your rental income as other income on line 21 of the 1040. You can then deduct your mortgage interest and property tax as itemized deductions on Schedule A.
You must distinguish between your intent here. If you intent is not to make a profit you can do as I mentioned. On the other hand, if you are renting for fair market value, you intent is profit, it just did not happen.
If you take this latter status, you can report the income and expense on Schedule E and include other expenses such as HOA dues, repairs, and the like, including depreciation. The only effect this will have on the home being your primary residence is that you will cannot exclude the amount taken as depreciation when you sell the house. In other words, you will owe tax on the amount of depreciation allowed or allowable.
