being an (unintended) landlord
March 1, 2011 7:25 AM   Subscribe

Being an amateur landlord - what are the laws about declaring and pay income tax when you rent out a room? How about when and if you move for work (and are renting at your new location, and have to rent out your primary residence back in the old location?)

I'm in a situation where I might need to move for work soon. I bought a house about a year ago, so I'm not at a place where I could sell it easily (and I still have 2 years till I wouldnt have to repay the homebuyers tax credit). So if I move (and I rent in the new location), how would that work? I'd still get to keep the deductions for mortgage interest and property taxes, right? But would I then need to pay income tax on the renters that would be renting my house? What other tax benefits would I gain or lose?

(And a seperate question - when you rent out a room in a house you're living in fulltime, are you supposed to pay taxes on it? I know that technically you are, although no one I know actually does)

Thanks for the clarity. This is something I'm really not too clear on. So many books on renting out focus on being a landlord and discuss the dynamics of (sometimes multiple) rental properties. If anyone has some good books or suggestions on this particular topic, that'd be great.
posted by anonymous to Home & Garden (7 answers total)
This will be impossible to answer not knowing what city/country you're in. Maybe contact a Metafilter moderator and ask them to insert the relevant details.
posted by EndsOfInvention at 7:30 AM on March 1, 2011

The best thing to do would be find a tax professional in the area in which you own your home. It can get so complicated (and renting may not exempt you from the tax credit issue - owning a home and being the primary occupant are two different things in a way that may matter there) and there can be local tax implications as well.
posted by Lyn Never at 7:56 AM on March 1, 2011

You just need to get an accountant. It's worth the couple of hundred bucks you'll pay to get this right, as not only will they be able to help you claim deductions you didn't know you had, but getting it wrong could easily subject you to hundreds of dollars in tax penalties.

Get thee to a CPA.
posted by valkyryn at 7:58 AM on March 1, 2011

Assuming you're in the US and want to DIY, IRS Publication 527 is a good place to start.
posted by iknowizbirfmark at 8:32 AM on March 1, 2011

Depends on where you live. A friend of mine was in the same situation and ended up paying more monthly because he lost the property tax abatement my city gives owner/occupants. Your mortgage may also require you to be an owner/occupant, so check on that as well. Talk to an accountant or a real estate attorney. You may also want to talk to a property management company, as it will be really difficult for you to manage your property remotely.
posted by electroboy at 12:43 PM on March 1, 2011

If you aren't using the house as a primary residence for three years, you'll have to pay the homebuyer tax credit back regardless of whether you sell it or not. Otherwise, iknowizbirfmark is spot on - start with Pub527.
posted by mbatch at 3:57 PM on March 1, 2011

There may also be state/local property tax issues, depending on where you live. Some property tax exemptions are based on residence in the home, and you lose them if you're renting it out, or don't live in the house for X number of years before you no longer live in it as your primary residence, etc.
posted by elpea at 5:23 PM on March 1, 2011

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