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I am moving out of Long Island - out of NY state. I still cannot sell the house after one year so I am renting out my house soon but will get the rent which is not enough to cover my mortgage payment. I have a few questions:
1. Is there any property tax difference for rental house and do I need to inform the township.
2. Do I need to pay any tax re the rental even it's no profit at all?
Your property tax will be higher because you will no longer be entitled to the STAR exemption. That is for your primary residence only.
You will need to pay income tax on the net profit on your rental. This is the rents collected less all expenses (interest, insurance, property tax, maintenance, depreciation, etc.). If this amount is negative, you can deduct it from your other income.
I am moving out of Long Island - out of NY state. I still cannot sell the house after one year so I am renting out my house soon but will get the rent which is not enough to cover my mortgage payment. I have a few questions:
1. Is there any property tax difference for rental house and do I need to inform the township.
2. Do I need to pay any tax re the rental even it's no profit at all?
3. Do I need to contact the IRS on this case?
Thank you for all advices.
1) In other words you are asking, because you can't sell your home you are wondering if your property tax burden is less? The answer is, no. If that were the case, wouldn't everyone rent?
2) Depends upon your tax bracket, income, investments, etc. Whether or not you have a profit or loss is of no consequence to the government. Income is income.
This is not because of the property tax, who don't know the crazy tax in LI, but as I am no longer living in the house for months, and also need to pay for maintenance of the cost such as electricity, pool, landscape during, etc, etc, the worse is when the spring time, it's humid that someone must take care of the basement. I cannot come back to LI so often as the cost of air-tickets! So that I'd rather have a responsible tenant to be there.
Quote:
Originally Posted by nuts2uiam
1) In other words you are asking, because you can't sell your home you are wondering if your property tax burden is less? The answer is, no. If that were the case, wouldn't everyone rent?
2) Depends upon your tax bracket, income, investments, etc. Whether or not you have a profit or loss is of no consequence to the government. Income is income.
I don't have STAR exemption as I am a foreigner-buyer in USA. I don't need to submit income tax form but just want to know if there is a tax regulation re the rental in USA. In my case, pay the mortgage and property tax as usual.
Quote:
Originally Posted by TomMoser
Your property tax will be higher because you will no longer be entitled to the STAR exemption. That is for your primary residence only.
You will need to pay income tax on the net profit on your rental. This is the rents collected less all expenses (interest, insurance, property tax, maintenance, depreciation, etc.). If this amount is negative, you can deduct it from your other income.
Depending on where your property is, you MAY have to notify the Town that you are now renting the house. The Town of Islip for instance requires a permit for any rental, regardless of whether it is an apartment, condo or entire house.
if you rent the house you must submit a tax form even if there is no profit as you must take the depreciation allowance . whenever you sell you will be required to pay back the depreciation whether you took it or not.
you must change your homeowners insurance too from ho3 owner occupied insurance to landlord insurance. very important to do this to break the link between household member vs tenant.
2. Do I need to pay any tax re the rental even it's no profit at all?
3. Do I need to contact the IRS on this case?
If you rent it out, it becomes a business. If you have a loss from it, that's deductible from your other income; if you make a profit, it adds to your other income.
Keep records on ANYTHING spent and on all income from the property.
Since this is all new to you, I'd advise seeing an accountant, the sooner the better.
Your entire mortgage payment is NOT an expense. The interest will be an expense, as will taxes and insurance. You could depreciate it, but you should talk to your accountant about that. You should also be able to deduct other expenses, such as travel to inspect it, (part of) your accounting fees, advertisements, general upkeep, etc. Major (capital) outlays may not be "expenses" but rather investments. These would be added to your depreciation schedule. It's not as simple as saying, "no profit" just because there's negative cash flow.
This is for federal taxes only. I have no idea what might be required by city and state. Once more I'll stress, contact an accountant or tax attorney.
you must change your homeowners insurance too from ho3 owner occupied insurance to landlord insurance. very important to do this to break the link between household member vs tenant.
Excellent point! Very important
And your lease with any future tenant should state that you require the tenant to get renters insurance!
your entire mortgage can be called due as that too is based on owner occupied as well.
because most folks think real estate requires no knowledge except buy a property and let the money role in they eventually get stung as nothing is a problem until its a problem.
i would bet except for those who got stung using ho3 insurance on a rental almost every landlord has no landlord insurance just their homeowners.
i have said many times thats a big mistake.
if anyone wants to know why ill be happy to explain but having got burnt myself i have explained it many times here.
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