By: Millie Gil
For many people who cannot or don’t want to sell their home in this depressed market, renting it out can be a practical option.
Many homeowners fail to get a bid that they’re willing to accept so what do you do when you just can’t afford the mortgage? If you’re one of the many folks who are in this situation, you look into renting your home — it can lessen the financial burden, and you might be able to turn a small profit.
Pros and cons of renting out your home include:
• You can keep your property to sell later at a better price
• The rental income covers mortgage, taxes, insurance, etc
• The tax breaks offset rent or other income
• You are the landlord
• Tenants may damage your property
• Could be taxed on gains if you later sell
But consider the tax breaks you can get from renting out your home. You can deduct pretty much any out-of-pocket expenses related to owning and managing your property when you rent it.
This includes deducting your mortgage interest payments, insurance, property taxes, maintenance, repairs, cleaning services and even the cost of travel and local transportation expenses incurred in the maintenance and management of the property and the collection of rent.
Then, there is the other deduction, called “depreciation. This is the portion of the property value you can take as a deduction each year.
And the really good news is the amount by which rental expenses exceed rental income is a tax deduction that can be used to offset up to $25,000 of other income, including salary. This juicy tax break is available as long as your adjusted gross income is $100,000 per year or less (this applies to single filers as well as married individuals). For those with income above $100,000 this tax break begins to be phased out and is phased out completely above $150,000.
Keep in mind, renting a home will come with headaches and problems. You’ll still need to maintain the property or pay someone else to do it for you. You’ll also need to check with your home owners insurance company to make sure you are still covered for damages while renting your home. If not, then you’ll need to revise or change your coverage.
Lastly, look to the tax benefits to sweeten your financial results and when the rental payments start to fall short of your out-of-pocket costs, It’s time to sell.
About the Author: Millie Gil is a licensed Real Estate Broker and Vice President of Bold Real Estate Group. For more information please forward email to email@example.com