AboutCarole Dunton Expertise Preparation of individual income tax returns including social security, pensions, lump sum distributions, sale of personal residence, stock and mutual fund sales, distributions from individual retirement accounts, moving expenses and itemized deductions.
General knowledge of schedule C for small sole proprietorships.
No experience in corporate, estate, partnership or large business returns.
Experience 9 years as tax preparer for major national firm.
Question Hi there and thanks in advance for your reply.
I am single and I am trying to buy a house. So far I have two options:
1- Buy a big house where I could rent the basement and some rooms to other people while living in the house
2-Buy a multiple units property where I can live in one and rent the others (here 1 to 3 more units).
Since the house will be my primary residence and I will also make some money from the rent, what is my tax liability? are there different from in both cases?
Will I be able to deduct the mortgage interest and at the same time what I spend to make the place more livable for tenants?
I will greatly appreciate your advice.
Thanks, Lyly
Answer Hi,
You will report the rental income and expenses (including mortgage interest and taxes) on Schedule E. Be sure to take depreciation on the rental unit(s). The portion of mortgage interest and taxes attributable to the unit in which you live will be taken as an itemized deduction on Schedule A.
Any capital expenditures on the home or homes will be added to your cost basis. Repairs and maintenance would be a rental expense.
