I’m currently on H1 status and own my primary home. I’m planning to rent it out next year and buy a new home to live in. I’m hoping to offset my current mortgage by converting the property to rental and using 75% of the rental income to qualify for the next mortgage.
Curious about how this might affect my taxes next year. Are there any tax rules or steps I should know about before making this move?
@Oakley
$2600 is your gross rental income. You can deduct things like depreciation, mortgage interest (not the principal part), property tax, maintenance, HOA fees, and other expenses. Whatever’s left after these expenses is what you’ll be taxed on at your regular tax rate. Often, people end up with a loss overall on rental properties.
These rental losses are usually “passive” and can only be deducted if you’re a real estate professional. But if you’re not one, and your total income from all sources is under $100k, you can still deduct up to $25k of rental losses. This loss amount gradually reduces to zero as your total income goes over $100k. If your total income is above $150k, you’d have to carry the loss forward until you make rental profits or eventually sell the property.
@Eli
I make under 100K from my main job. If I add around 30k in rental income, bringing me close to 120k total, would that cut me out from getting the rental loss deduction?
Oakley said: @Eli
I make under 100K from my main job. If I add around 30k in rental income, bringing me close to 120k total, would that cut me out from getting the rental loss deduction?
Your rental income is about $31k, but you’ll also have deductions, so your final income would likely end up around $110k-$115k. You’d probably be able to deduct up to $15k or so of the loss … likely the full amount.