Hi and welcome to Just Answer!
There is no "tax benefits" from renting. Your benefits are rental income
If your expected rental income $1000 a month * 12 = $12,000
Your rental expenses are mortgage interest
, real estate taxes
and insurance $550 a month * 12 = $6,600
Please be aware that only mortgage interest is deducted - not part of the payment attributable to principal. The cost of rental property
is recovered via depreciation
. Residential rental property
is depreciated over 27.5 years. That means if your cost basis is $100,000 - you will deduct depreciation $100,000 / 27.5 = $3636.
The drawback is that depreciation will be recaptured and added to your income when you sell the property.
Additional overhead of keeping record and tax preparation
will be ~$100-$200
If you hire a property manager - it might cost ~10-25% of your gross receipts
- and will cost at least $1200 per year.
Seems as you will have losses from rental activity and that will be passive activity - so such losses may be deducted only against your other passive income
or will be carried forward and will be deducted when eventually you sell the property.
Thus - most likely rental activity will not affect your current tax liability
- but will provide the positive cash flow to cover ongoing expenses.
If you plan to convert a rental property into your personal
property - you would need to live in that property at least five years to exclude capital gain
(not two years) - so that might be additional disadvantage in future, but if you plan to live there at least five years - than there will not be any difference for you.
Let me know if you need any help or clarification.
I will adjust your estimations if you provide more précised amounts.