Talk to Me About Rentals...Taxes, Etc.

DebsPSUbride

If we get an offer any time soon on our TH, we may rent for 6 months or so, so we don't rush into buying our "forever home"  We figure this way, we can save more money for a downpayment (not paying taxes or maintanence, and our taxes are high for a TH), and as I said, we can take our time finding something else.  At the end of the year we rent a house or townhouse, I wonder if we'lll owe a crapload of taxes because we don't have property to write off?  Also, if you ever rented a house or a TH from someone, how did it go for you?

AmyRob04

Well I'll put it this way - we forgot to include our mortgage interest statements with our tax return last year and got a nice letter from the IRS stating that on $22k (est, it was around there) interest we were claiming,if it was a false claim and we didn't actually have the write-off we'd owe something like $10k in additional tax payments.

AmyRob04

Oh and I'm sure that's dependent on income and your tax bracket, but that's how it worked out for us.

hookersbabe

this isn't really a fair question to ask bc we don't know what your current return looks like. do you get a refund solely bc of the interest and tax deduction? if so, then you're going to get whacked...but that said there are so moving parts to income taxes, no one could really say without running the numbers.

do you do your return or have it done? if you do it yourself on turbo tax, after you complete your 2011 tax return, make a copy of it and play with the numbers...what happens if you only have 6 months of interest and 6 months of mortgage...at that point are you better off taking the standard deduction over itemizing...play and see what happens.

if you have someone do your returns. and them to run the numbers for you...

MrsDB

we rent a townhouse, we get like a $50 credit or something on property tax on our return.  i would just figure out your taxes 2 ways when you're doing them, leave off your property tax deduction on one and see what the difference is. either way- even if you owe more, it'd be better than buying a house you don't love. 

kellyann1972

we almost always owe alot even with mortgage interest, but if you are at a higher income I think you would be hit hard without that write off. You could probably figure it out and compare against the savings you would have for those 6 months.

AmyRob04

hookersbabe:

this isn't really a fair question to ask bc we don't know what your current return looks like. do you get a refund solely bc of the interest and tax deduction? if so, then you're going to get whacked...but that said there are so moving parts to income taxes, no one could really say without running the numbers.

do you do your return or have it done? if you do it yourself on turbo tax, after you complete your 2011 tax return, make a copy of it and play with the numbers...what happens if you only have 6 months of interest and 6 months of mortgage...at that point are you better off taking the standard deduction over itemizing...play and see what happens.

if you have someone do your returns. and them to run the numbers for you...

So true on all points. My example was obviously based on our income and write-offs. We always have our taxes run multiple ways for the reasons stated above.

laurenpetro

it's posts like this that make me want to kiss my acountant's feet.