Author Topic: renting condo to family under market rate and depreciation  (Read 574 times)

ca-rn

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renting condo to family under market rate and depreciation
« on: March 20, 2018, 05:58:02 PM »
i've been renting a condo to a family member for about 5 years.

not a situation i wanted to be in but it was forced onto me to buy condo outright with "family" money.  i do have my own rental property and am the "responsible" one.

"agreed" rent was below rent but family member would do own repairs and maintenance with own funds... plan was family member would eventually buy the condo.

anyways, more family drama ensued, no rent increase and now they are having trouble meeting the already low market rent.  meanwhile, property and rent potential is gone up alot in the area and is now totally out of reach for family member.

so here is the issue, i've been collecting the rent and taking deductions/depreciation on the property.  net rent after hoa fee is equivalent to what renting a bedroom in a house goes for here now.

but apparently family member is having more financial issues and rent may go even lower, not sure i can still depreciate property?  basically letting family live in condo and is not a true rental situation. 

can i convert it back as a second home, stop deduction/depreciation of property?

plan is to sell condo and gift family member a set amount to find a small cheaper place to live.  i will have to repay depreciated amounts when condo is sold.






SeattleCPA

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Re: renting condo to family under market rate and depreciation
« Reply #1 on: March 21, 2018, 07:12:12 AM »
If you rent below market to a family member, I think the rules of Sec. 280A kick in. (The Sec. 280A rules describe what you do with property that's sort of personal but also sort of rental like a vacation place you rent. Below market rents get treated as personal BTW.)

If the rules of Sec. 280A do kick in, basically you'll count the rent you receive as income and then (as would be the case with a second home), you'll count your mortgage interest and property taxes (just as you would with a vacation home).

I think this is best reliable resource: https://www.irs.gov/taxtopics/tc415

The logic here: You can't have a "rental" occupied by a family member who pays token rent and then treat the property as a real investment.