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My son is working in South Korea as a consultant to US Army.

My son is working...

My son is working in South Korea as a consultant to US Army. He has a home in Arizona. Can he rent his home to me while he is gone and claim the tax benefits? How is fair rent determined? Also, if home remains unoccupied are there any tax benefits? Does he maintain a US state of residence if he sells? How does this affect state taxes? One last question, if he sells he won’t buy another home until he returns in 3 years are there tax implications. He does not have significant equity?

Accountant's Assistant: Have you talked to a South Korean lawyer about this?

No

Accountant's Assistant: What steps have been taken so far?

None. He just went over this week.

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3/22/2018
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,357
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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Can he rent his home to me while he is gone and claim the tax benefits? How is fair rent determined?

Yes he can. He would file a Schedule E to report the income and the expenses. He is also allowed ot claim depreciation and insurance costs which are not allowed for a homeowner that occupies. Fair rental value is the rent charged to a stranger not less for a relative.

Also, if home remains unoccupied are there any tax benefits?

Not really. He can claim his interest and taxes still

Does he maintain a US state of residence if he sells?

No but he still is required to file as a Citizen of US

How does this affect state taxes?

The rental is reported to AZ because the property is in AZ

One last question, if he sells he won’t buy another home until he returns in 3 years are there tax implications.

If he sells if does not matter if he buys another home or not. If he has not lived in the home for 2 years out of the 5 prior to sale he does not get the full exclusion of gain ($250,000)

Please let me know if you need more information.
If not then please scroll up to see the STARS to rate so I am credited.

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Customer reply replied 4 months ago
Not sure how to determine fair market rent? Also, he has lived in home for 3 years so if he sold he should still get the exclusion? He is 39.

He would if he sells now.

Look at other houses in area that are for rent to see what they are charging.

A positive 5 star rating is appreciated so I am credited for assisting.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,357
Experience: 15years with H & R Block. Divisional leader, Instructor
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