Author Topic: Will it benefit me to take a deduction for renting a room to my adult son?  (Read 2158 times)

Jana

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I can count his contribution as a gift (family to family) or I can take the writeoffs like it was a rental property. I am a high wage earner with income from a pension and a second career(250,000+). His rent is 600 and because the house if paid off, actual expenses are only around $1000 a month. Which would benefit me more on my taxes?

electriceagle

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You can only deduct expenses if your son pays market rate rent.

Jana

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Thanks Electrieagle...it would qualify as market rate for one room.

jwright

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Rental Income and/or Losses are considered passive unless you are a real estate professional.  If you don't have other passive income to offset, you won't be able to deduct the loss. 

*There is a rule for MAGI under $150,000 to be able to deduct some rental losses, however your income is too high

bacchi

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Rental Income and/or Losses are considered passive unless you are a real estate professional.  If you don't have other passive income to offset, you won't be able to deduct the loss. 

*There is a rule for MAGI under $150,000 to be able to deduct some rental losses, however your income is too high

Passive rental losses can also be carried forward.

CareCPA

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Are you sure you would even be in a loss position by the time you sectioned off the depreciation for his room and his share of utilities? If not, no benefit.
Even if you have a loss, does it make up for the tax on depreciation recapture you'll have if you sell? Capital gains exclusion for a primary residence is only for the portion not held for rental or used in a business.

jwright

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Rental Income and/or Losses are considered passive unless you are a real estate professional.  If you don't have other passive income to offset, you won't be able to deduct the loss. 

*There is a rule for MAGI under $150,000 to be able to deduct some rental losses, however your income is too high

Passive rental losses can also be carried forward.

Until you can offset it with passive income or sell the property.   Even when you sell the property you'd have to deal with depreciation recapture.