Home Rental Implications

[Thurl]

s About Taxes)/Home Rental Implications Advertisement Expert: Carole Dunton - 5/26/2010 So, I am moving to Maryland/West Virginia for my job, but I cannot afford to sell me home in Virginia(bought two years ago).  So we're renting an apartment in Maryland/West Virginia and considering renting our home in Virginia to some trusted friends.   1: Can we maintain our Virginia Residency? 2: What are the tax implications of renting our home?  Will we really have to claim the rent payments as income even if they're just covering the mortgage?   3: What happens when we're ready to sell the house?  What if we move back into the home later?

Thank you

[Balwant]

Hi,

You are required to report your rental income and expenses on Schedule E.  One of your expenses is depreciation on the house.  Be sure to take that deduction because when you sell the house the sale will be treated as though you had taken the deduction whether you did or not.  You can deduct a loss against other income while you are renting the house.

If you move back into the house later there's no problem.  When you sell the house at a gain the amount of the gain attributable to depreciation taken or not taken is taxed at a higher rate than the balance of the gain.

I don't know Virginia's residency requirements.  You need to check that out locally.

Regards,

Carole