So, we rent out a room in our house. Without really knowing what we're doing, we've been using Turbo Tax to take depreciation on that part of the home for the 18 months we've owned it (have rented out the entire time). Additionally, we don't have enough deductions to itemize...so we take the standard deduction, if that matters. Also, we plan on renting out the entire house about 5 years from now, when we move to another state.
Now, if we sell the property at some point, apparently we owe back the depreciation taken over time to the IRS...no matter whether we actually took the depreciation or not. And that rate is 25%, I believe, which sucks.
We're fairly ignorant of the nuances of this whole process. Anyone knowledgable out there who can give us a rundown?
When asking friends who own rental property, their advice was to not report rental income...not the most helpful advice, though I suppose it's effective in a way. :)
