Rent or Second Home for Tax Filing?

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daehelgob48
Posts: 38
Joined: Thu Sep 24, 2015 2:27 pm

Rent or Second Home for Tax Filing?

Post by daehelgob48 »

I have read lots of information and still unsure if I should rent to family member and depreciate a house and deduct expenses my son lives in. The house is paid for so no mortgage interest deduction. I have had lots of repairs and about twice the cost vs income from the house in 2022. I have had the house with my son living in it for two previous years. I have not reported on house either years I believe I can claim as second home with a family member living there helping share the expenses of the second home. I am getting less $ in help from my son as I spend to keep the house up. I am concerned I might cause tax issues costing my son or myself in the future years after I pass away or transfer the house to my son. Anyone have a similar situation?
Carefreeap
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Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Rent or Second Home for Tax Filing?

Post by Carefreeap »

Most people here will tell you it's generally a bad idea to rent to family members.

I'm not a CPA but I'm sure a tax expert will be on at some point. I am an owner of a vacation rental and a second home. Generally speaking if you are going to treat the property as a rental you have to declare the income in order to write off the repairs and take depreciation. Bigger repairs will need to be capitalized and written off over time. You will need to "recapture" the depreciation when you sell and that's currently at a 25% federal rate.

If you keep it as a second home which sound like what you've been doing you can add capital repairs to the basis of the property.

This doesn't sound like a great investment. Why are you keeping the property?
Every day I can hike is a good day.
sailaway
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Joined: Fri May 12, 2017 1:11 pm

Re: Rent or Second Home for Tax Filing?

Post by sailaway »

Is your son paying market rent? That, not your costs, is what the IRS cares about.
Topic Author
daehelgob48
Posts: 38
Joined: Thu Sep 24, 2015 2:27 pm

Re: Rent or Second Home for Tax Filing?

Post by daehelgob48 »

Carefreeap wrote: Thu Nov 24, 2022 10:30 am Most people here will tell you it's generally a bad idea to rent to family members.

I'm not a CPA but I'm sure a tax expert will be on at some point. I am an owner of a vacation rental and a second home. Generally speaking if you are going to treat the property as a rental you have to declare the income in order to write off the repairs and take depreciation. Bigger repairs will need to be capitalized and written off over time. You will need to "recapture" the depreciation when you sell and that's currently at a 25% federal rate.

If you keep it as a second home which sound like what you've been doing you can add capital repairs to the basis of the property.

This doesn't sound like a great investment. Why are you keeping the property?


Only reason I bought and keep the property is to help my son have a place to live
Topic Author
daehelgob48
Posts: 38
Joined: Thu Sep 24, 2015 2:27 pm

Re: Rent or Second Home for Tax Filing?

Post by daehelgob48 »

sailaway wrote: Thu Nov 24, 2022 10:51 am Is your son paying market rent? That, not your costs, is what the IRS cares about.
Yes
Carefreeap
Posts: 3449
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Rent or Second Home for Tax Filing?

Post by Carefreeap »

daehelgob48 wrote: Thu Nov 24, 2022 9:45 pm
Carefreeap wrote: Thu Nov 24, 2022 10:30 am Most people here will tell you it's generally a bad idea to rent to family members.

I'm not a CPA but I'm sure a tax expert will be on at some point. I am an owner of a vacation rental and a second home. Generally speaking if you are going to treat the property as a rental you have to declare the income in order to write off the repairs and take depreciation. Bigger repairs will need to be capitalized and written off over time. You will need to "recapture" the depreciation when you sell and that's currently at a 25% federal rate.

If you keep it as a second home which sound like what you've been doing you can add capital repairs to the basis of the property.

This doesn't sound like a great investment. Why are you keeping the property?


Only reason I bought and keep the property is to help my son have a place to live
Is there a reason he can't live on his own? This property doesn't seem to make financial sense for you to keep.
Every day I can hike is a good day.
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