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Old 11-03-2013, 12:10 PM
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Considered rental property?

I moved out of my house in Dec 2012. I spruced it up and put it on the market in Feb 2013. In Oct 2013 I received an offer that included a delayed closing of 6 months and the buyers would move in and pay rent while waiting to close.
Can the house be considered rental property now and expenses deducted on my 2013 and 2014 taxes until closing?



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Old 11-04-2013, 01:03 AM
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Quote:
Originally Posted by Cmarkj View Post
Can the house be considered rental property now and expenses deducted on my 2013 and 2014 taxes until closing?
I guess so. If you still want to let the buyer move in, you need to amend the purchase agreement by adding rental terms. You need to consult an attorney to draft the agreement so you can be sure it is adequate. These provisions should cover how much rent will be and when it is due. Also make sure the buyer does his walk through inspection prior to moving in. That way there won't be any surprise problems at actual closing time. Upon moving in, the utilities should be put into the buyer's name. Make sure the buyer obtains adequate property insurance. The seller should require that the buyer put a substantial deposit in escrow and sign a liquidated damages agreement. The deposit can be applied towards the down payment if and when the sale closes on time. If the closing is delayed or the buyer backs out, the deposit will be forfeited as liquidated damages. Your agreement should stipulate that the buyer will receive only a portion of his deposit back if he vacates the property.



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Old 11-04-2013, 10:50 AM
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Thanks for the reply. Based on your answers, I think all of the items you brought up are covered. Our real estate agent was originally the one that put this all together and when we met with the tenant/buyer to see if this is what we wanted to do for them, the agent had a contract already drawn up with these exact points.
I had to install a new furnace 2 weeks after they moved in and their rent ( which I would consider to be the local prevailing rate) doesn't quite cover my mort/taxes/insurance because of my interest rate. I was just asking if it would be considered a rental so these expenses could be dealt with in another manner.



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Old 11-04-2013, 11:12 AM
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You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property.Expenses of renting property,i.e., •
Cleaning and maintenance, Commissions, Depreciation, Insurance. Interest (other), or etc can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them. A thorough examination of the Sch E of 1040 will help answer a lot of the questions you have about home rent income. You need to determine the usage limitations for the rental home. As long as you use the place for more than 14 days or more than 10% of the number of days it is rented -- whichever is greater -, it is considered a personal residence. You can deduct rental expenses up to the level of rental income. But you can't deduct losses. The definition of "personal use" days is fairly broad.the deductible expenses in the renting of the home will be limited. It is better to leave the home empty than run the risk of losing these deductions. As long as you rent out your house for more than 14 days, you become a landlord in the eyes of the IRS. That means you have to report your rental income. But it also means you can deduct rental expenses. It can get complicated because you need to allocate costs between the time the property is used for personal purposes and the time it is rented. You need to report rental income on your return for the year you actually or constructively receive it, if you are a cash basis taxpayer. You are a cash basis taxpayer if you report income in the year you receive it, regardless of when it was earned. You constructively receive income when it is made available to you, for example, by being credited to your bank account.



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