Considering Tax While Transforming Your Residence to a Rental Substance

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Tax on sale of property

More than 250K will be ignored by the tax department if you can meet the qualifications.

When you will review two different decisions between selling a house beside the street and renting a property, obviously some rethinking will be needed. The conscience of selling any property depends on the upcoming profit or loss from the property.

If you can sell your home with a remarkable profit, the money affairs will be excluded due to the term of “Home Sale Tax Exclusion”. You have to be in the residence for minimum two years to be qualified for the tax exclusion. More than 250K will be ignored by the tax department if you can meet the qualifications. If you are married, then the amount will be doubled.

In another condition, if you cannot get any profit from the selling, the deduction process will be regulated by the tax law. You will need to transform the residence into a business property. For an investor, this is also considerable.

Basically, the rental property term is a branch of business.

This discussion is going very easy on you I guess. For any taxpayer, he will consider own CPA firm for being included as a rental property. In the long run, this will affect much for the businessman and create an inconvenient situation for paying taxes.

In the last year the percentage of weight of the rent has been lowered from 22.3% of 2013 to 21.2% of last year in the part for the economic recovery and the return of the sale. Despite this, the experts consulted indicate that the lease is growing and that after the bursting of the housing bubble is eradicating the mentality of renting is “throw the money.” With these furniture, the increase in the profitability that the rental houses produces is one of the keys that can help to offer the offer of houses to rent.

Doubts when it comes to housing for rent

If there are so many factors in favor, what is stopping the rent? In addition to the ingrained mentality that the hay that is proprietary, among the reasons that the experts point out so that some cows are not rented from the victims is the fear of the owners before what can arise. Legal insecurity or lack of courts can complicate the decision to rent the home because of the fear of living a default.

Many who own empty homes are wondering what is best, whether to sell or rent. There is no absolute truth, as it depends on the circumstances, but finding the right answer for each can be easy if you consider 4 factors …


At present, the average time to sell a property exceeds 12 months. Having an empty flat supposes many expenses: community of owners, IBI, taxes … reason why, to wait a year with him on the sale can leave by a important peak. Conversely, signing a lease does not usually cost more than a couple of weeks, which allows you to monetize the home in a very short time.


When you decide to sell, you obviously lose ownership of the property, the production of a pantry, and yet a change, you receive an economic amount. The option to rent, however, involves keeping the deeds and being able to resort to the property if necessary.


Everyone knows that paperwork is tedious and cumbersome. One advantage of doing a rental contract, unlike a purchase, is that it does not require many documents and is a fairly simple process. No notaries, no scripts, no mortgages … the rent is much simpler, cheaper and quicker than that.

Transforming the Rental Property

As a landlord or homeowner, the profit and loss are connected with the operations related to the outcomes from the rental property. PAL, or Passive Activity Loss has put a limitation of any kind of loss. The amount which will be considered for deduction, is contained with household chores and fixation costs.

For generating Loss, the property will go under a depreciated process. As a matter of depreciation. The owner should consider the ongoing market stability. If converting is a fair way to avoid loss, then he should go for the option.

The gross income is calculated from the net profit after a business intention in legislative grace.

Well, there are some exceptions while you are trying to get a tax deduction. They are described following:

  • AGI should not be more than $100000.
  • Your participation in lease operation should be more effective.
  • Last of all, the selling process should be continued with a fair market policy. If the market value decreases, the losses will be proportionally decreased. So, at the end of the discussion, we can draw a line saying that, converting the residence is more profitable for a homeowner.

Many people decide to rent a property they own, rather than sell it, for various reasons; Perhaps the market is saturated and prices are low, then we can expect conditions to improve, so we can ask for a higher price. There are always people who need to stay in a temporary place, while finishing studies, or working in the area, so renting for a while may be a good option.

However, before making a final decision, it is good to analyze the situation and consider the financial conditions that are given in each case, be it sale or rent.

In case of selling

The tax office offers you a generous tax cut if you have lived in your home for the last five years. Married couples who declare the sale together can have up to $ 500,000 in tax-free capital, meanwhile singles can enjoy $ 250,000 for the same concept.

People who intend to rent for only one or two years may also be eligible for these discounts, provided they have lived, as mentioned, for more than five years in the property.

Consequently, people who have plans to sell, by considering the tax-free gain on a liability, may desist. As a rule, if you have a considerable gain on your property, you will not want to rent. Remember that if you are willing to return and live in the house for a few more years, you will qualify for the rebate program.

If you decide to rent
Tax invoices can be lowered and even eliminated easily thanks to multiple deductions in expenses and depreciation:

Mortgage interest payments, property tax payment, advertising or real estate broker fees, repair costs, maintenance costs such as cleaning services, utilities, fire and civil liability insurance, transportation costs incurred For the maintenance and collection of rent, and there is also the “ghost” deduction or depreciation.

The improvements can not be deduced, but the depreciation of appliances, carpets, furniture and pipes, in just five years. In any case, calculating these figures is complicated, it is recommended to consult with a public accountant before filing the return.

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