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Posted by Paul Thomas, CPA on October 21, 2007, 7:47 pm
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> I fear I know the answer to this question, but I wanted to
> double check: I have a home in the US I do not live in as I
> am out of the country for two years. But a family situation
> caused me to come back and visit for six weeks this year.
> The home was mostly empty the rest of the time, but I did
> rent it out for a few months and received $35,000 in rental
> income. Because I was in the home more than 14 days does
> that mean I can take no expenses against that $35,000 in
> rental income and it will be taxed like ordinary income?
Nope. It means your losses will be limited, that's all.
As long as your use was not more than10% of the total number
of days rented out (which it might be), you would just
pro-rate all expenses to back out the % of personal use
time.
If your use was greater than 10% of the rental time (which
it might be), you still pro-rate expenses based on the days,
but your deductible expenses are limited to income (best
sceanrio is a $0 net sum). Not much is lost though, as
unused deductions get carried forward to future years when
you 1) don't use the place and 2) have rental profits. So
in this example, you carry deductions to net against future
profits.
Get out your calandar and count the days of personal use.
More than 36 days personal use against a full year rental
and you have deductions limited to income.
> What about the mortgage and household improvements and
> ongoing expenses like gardening? What about broker's fees?
> Is there any thing I can do to reduce the taxes on this
> revenue stream? (Next year I will stay in a hotel if I have
> to come back for more than 14 days.)
Naa....talk to a CPA or EA about your return situation this
year.
--
Paul A. Thomas, CPA
Athens, Georgia
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