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Robin D.
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Experience:  15years with H & R Block. Divisional leader, Instructor
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1999 Bought duplex in small HOA governed community in Wheat

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1999 Bought duplex in small HOA governed community in Wheat Ridge, CO. Lived there until remarried and eventually moved out to brand new home in 2007. Left daughter, boyfriend to "place-hold". Market was too bad to sell at the time. Since then my kids and 2 other 20-somethings have lived here, paying only enough to cover my mortgage payment, I pd HOA, utilities, phone, tv, internet, property tax,etc. The deal was never to make a profit, but simply to hold house until market improved. Tried to do my own taxes last year and owed $5000 due to limits on what I could "lose". This isn't a business - I read somewhere that if house "rental" not meant for profit, different tax laws/rules applied. I need to not owe money on this "money pit". Advise, IRS references please.
Submitted: 4 years ago.
Category: Tax
Expert:  Robin D. replied 4 years ago.

Hello and thank you for using Just Answer.

There are different rules for Not for Profit Rental and Personal Use Rental.

You are considered to use a dwelling unit as a home if you use it for personal purposes during the tax year for more than the greater of: 14 days or 10% of the total days it is rented to others at a fair rental price.

A day of personal use of a dwelling unit is any day that it is used by:

  1. You or any other person who has an interest in it, unless you rent your interest to another owner as his or her main home under a shared equity financing agreement;
  2. A member of your family or of a family of any other person who has an interest in it, unless the family member uses it as his or her main home and pays a fair rental price;
  3. Anyone under an agreement that lets you use some other dwelling unit; or
  4. Anyone at less than fair rental price.

Numbers 2 & 4 above hit right at your situation. You have family members and others living in the property that you are not collecting a Fair Rental Price from on their use of the property.

You will not be able to deduct your rental expense in excess of your gross rental income. If you itemize your deductions on Form 1040, Schedule A, you may still be able to deduct mortgage interest, property taxes, and casualty losses on that schedule. As far as the expenses go you can only subtract from the rent that is paid you for their use of the property. This means that you may not show a loss against other income. The additional interest and taxes that you pay on this property will increase your Schedule A itemizing. If you are deducting what you are allowed and you are collecting the mortgage at least from the parties using your property then you should not be seeing a tax increase form the property but you will not see the use of it reducing any other income you have as a rental loss either.

 

I sincerely XXXXX XXXXX could advise you differently,

 

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7868
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 8 other Tax Specialists are ready to help you
Customer: replied 4 years ago.

Just to clarify - I did not use Schedule A to show the mortgage interest, or property taxes last year - I was using schedule C - since this really isn't a business, should I be using schedule C or just A?

Expert:  Robin D. replied 4 years ago.

Hello,

You need to how the interest paid and taxes on Schedule A.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7868
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 8 other Tax Specialists are ready to help you

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Robin D.
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15years with H & R Block. Divisional leader, Instructor