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Renting out my condo

Started by goose
about 12 years ago
Posts: 29
Member since: May 2008
Discussion about
I'm considering renting out my condo and moving to the suburbs. I know that I won't be able to cover my total cost with rental income and I'm OK with that because I want to hold this apartment long-term. Are there are any tax (or other) mitigants to taking a loss every month? For example, I've heard that my common charges would be tax deductible but is that still the case if I have negative income? Any advice is appreciated.
Response by broadwayron
about 12 years ago
Posts: 271
Member since: Sep 2006

When you say "taking a loss", are you simply referring to what you owe versus the potential rent you would/could receive? I mean, say you bought your place with 0 down... renting it would most likely cause you to have a "loss" each month. But, if you put 90% down, and rented it for half the current market rate, by your formula, wouldn't you have a "gain" each month? That doesn't make any sense.
Sorry, I don't have any answers for you, but I've always wondered about this, because I've heard people referring to how much they "make" or "lose" on their rentals, but they never state how big their down payment was. There's got to be a different (better) way of calculating profits/losses, other than simply money in versus money out.

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Response by goose
about 12 years ago
Posts: 29
Member since: May 2008

I mean that I will take in less money in rent than I owe for mortgage + condo charges + taxes each month. I hear what you're saying about a "loss" which is obviously based on how much I've financed and I don't know the answer so that's why I'm asking. I don't know how this calculation might work for tax purposes or other income planning both near- and long-term.

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Response by fujiman
about 12 years ago
Posts: 9
Member since: Feb 2008

You should look into how the tax laws were changed last year. Its my understanding that prior to the change you could take a rental unit, live in it for two years and then avoid up to $250K of gain ($500K for married) on the unit as your personal residence. Last year Congress made changes which now allocate to the gain to your residence period and the rental period. Now if you owned and lived in the property for 2 years, rented it for 6 years and moved back in for 2 years (total of 10 years) you would have to pay a capital gain on 60% of the $250K/$500K exclusion. Previously the entire $250K/$500K would be recognized as part of the residency period and be excluded from tax.

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Response by Slope11217
about 12 years ago
Posts: 233
Member since: Nov 2008

goose: I'm not sure if this what you were getting at, but the main tax implication I see is that whatever sum you get in rent constitutes taxable income and would have to be disclosed on your taxes. So, not only are you not going to be able to cover your costs, but you'll only be netting 72% or 65% of whatever amount you are able to get in rent (once you account for your 28% or 35% marginal tax bracket, e.g.).

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