Real Estate question: tax implication

[huey1124]

Hi,

I'm trying to buy my first home, most likely a townhome. Only problem I have is that I am currently in a long lease, which I can't get out of until next year.

If I were to buy a townhome, and rent it out until my current lease is up, can I still deduct the mortgage interest? And do I have to report the rent paid by the renter as income? I want to make sure that I can afford to buy this home first.

Thanks in advance!

 

[Wingznut]

Before you invest in such a serious proposition, you'd be WAY better off seeking the advice of a CPA or attorney, rather than a bunch of geeks at ATOT.

 

[kermalou]

wince you will not be living in that home and renting it out, the mortgage interest in not deductible from your income per say, but deductible from the income you recieve from renting out that townhome.

you mortgage interest is only deductible for the house you reside in.

 

Yea, a CPA would give you a solid answer.

You would hold the mortgage so yes you can deduct the interest, unless you there is a requirement to hold primary residence there.. At the same time yes you must claim the retal income and pay taxes on it.

Unless you do something not so legal.

 

[rahvin]

Short answer. You treat the townhome like a business, the mortgage interest offsets rental incomes (yes you have to declare it, no you can't deduct mortgage interest against your normal income). The house will be a loss each year (depreciation).

Take wingznut's advice and talk to a CPA. If you do it right it's going to be a wash, do it wrong and you are gonna hurt. Have you looked into sub-leasing your rental? Might talk to management about letting you out without penalty.