Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Are there any tax issues or flags when buying more than one house in the same area? I've got a really, really good friend who needs a place to live.. the second home I'm looking to buy would be like a townhouse or condo, for cash. My first home is also a small townhome and I paid cash. If I own two homes in the same area for cash.. is the IRS going to come after me and insist that I label one as rental property? My friend is going to just pay the expenses that I would have had to pay to own the second home (property tax, home insurance, utilities, hoa, and maybe some upkeep with appliances/yard/roof). So I'm not profiting, other than if the house goes up in value, if I sell it like 10 years from now.
I'm just wondering... since I'm going to be listed as a homeowner with 2 residences and no rental property.. is this an issue? I read somewhere about an annual gift limit.. which is 18K to a friend or family member in 2024. The rental market in this area isn't high.
Any red flags I should know of ahead of time before doing this? Btw, I've lived with this friend in the past and they are super clean, (cleaner than me), and super respectful.. older. No kids. No pets. I'm looking for advice more about when I go to pay my taxes every year is there going to be some issue with me owning 2 properties?
Status:
"I didn't do it, nobody saw me"
(set 5 days ago)
Location: Ocala, FL
6,488 posts, read 10,369,123 times
Reputation: 7945
One major thing is that you can only declare a homestead on only one home, not both for tax deductions. I think you need to consult a CPA to answer your questions in more detail.
If you were renting one home, you would need to report that as income, but you said you won't be renting out one of those homes.
If you're considering buying a second home, there are a few pros and cons to weigh when it comes to your taxes.
Homeowners can deduct up to $10,000 total of property taxes per year on federal income taxes, including taxes on a second home.
If you don't rent out your second home, it's taxed much like a primary residence, with mortgage interest and property taxes deductible.
If you're planning to rent out your second home for part of the year for income, however, your taxes will be much different, with more deductions available, and income tax due on any rental income.
Are there any tax issues or flags when buying more than one house in the same area? I've got a really, really good friend who needs a place to live.. the second home I'm looking to buy would be like a townhouse or condo, for cash. My first home is also a small townhome and I paid cash. If I own two homes in the same area for cash.. is the IRS going to come after me and insist that I label one as rental property? My friend is going to just pay the expenses that I would have had to pay to own the second home (property tax, home insurance, utilities, hoa, and maybe some upkeep with appliances/yard/roof). So I'm not profiting, other than if the house goes up in value, if I sell it like 10 years from now.
I'm just wondering... since I'm going to be listed as a homeowner with 2 residences and no rental property.. is this an issue? I read somewhere about an annual gift limit.. which is 18K to a friend or family member in 2024. The rental market in this area isn't high.
Any red flags I should know of ahead of time before doing this? Btw, I've lived with this friend in the past and they are super clean, (cleaner than me), and super respectful.. older. No kids. No pets. I'm looking for advice more about when I go to pay my taxes every year is there going to be some issue with me owning 2 properties?
You would be renting the house out regardless of what you want to call it. It's not a second home for your use as a vacation place or whatever. It's a home that you bought but are letting someone else live there in exchange for them paying you money. That's considered as "rent" by the IRS and therefore the property should be treated as a rental property for tax purposes.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,754 posts, read 58,140,793 times
Reputation: 46247
If you receive rent, it must declared as income. And... You must fully comply with IRS rules, including declaring depreciation. +/-
+.... You have income, can make deductions, can offset some (other) income with losses,
"-".... When you sell you MUST recapture depreciation (whether you took it or not).
You must also be properly insured, even if in your home. Must properly file taxes, must be properly zoned to allow rental (HOA or city, or county may disallow). This rented space will also affect your $500k tax free exclusion when you sell, and can extend the 24 month frequency. (For the depreciated / declared rental portion)
I've had rental homes since I was a teenager (50+ yrs). Several are 2500 miles away. No catastrophes, yet. I also have multiple living spaces in each of my homes, just on case! (I need a caregiver, or have a friend in need, or a boomerang kid). For my inhome tenants, I prefer them to 'boarders' rather than renters. But I carry extra insurance coverage when they are occupying space on my home (as a totally separate living unit).
Are there any tax issues or flags when buying more than one house in the same area? I've got a really, really good friend who needs a place to live.. the second home I'm looking to buy would be like a townhouse or condo, for cash. My first home is also a small townhome and I paid cash. If I own two homes in the same area for cash.. is the IRS going to come after me and insist that I label one as rental property? My friend is going to just pay the expenses that I would have had to pay to own the second home (property tax, home insurance, utilities, hoa, and maybe some upkeep with appliances/yard/roof). So I'm not profiting, other than if the house goes up in value, if I sell it like 10 years from now.
I'm just wondering... since I'm going to be listed as a homeowner with 2 residences and no rental property.. is this an issue? I read somewhere about an annual gift limit.. which is 18K to a friend or family member in 2024. The rental market in this area isn't high.
Any red flags I should know of ahead of time before doing this? Btw, I've lived with this friend in the past and they are super clean, (cleaner than me), and super respectful.. older. No kids. No pets. I'm looking for advice more about when I go to pay my taxes every year is there going to be some issue with me owning 2 properties?
1.) This is not a "second home" in the sense that you would be living in it. The situation you describe is that of a rental property, period.
2.) Consult a CPA or trusted financial/tax advisor on this before even considering it.
I own two homes, not in the same area, not that it matters. I also have rental properties. My homes are treated as my personal residences and are reflected in that manner on my taxes. If you are using one of these properties as a means of collecting rent, or are letting someone live in it as their primary residence and they are paying rent, it's a rental and the tax implications can be substantial.
That's not to say you couldn't do something under the table, which I would highly advise against, as you're putting both yourself and the renter at risk because you likely wouldn't have a contract.
As for your question posed, if you own two houses and they are both your personal residences, the only real tax implication is if you have a mortgage, which you don't, and property taxes. You could only claim one of the residences as a primary dwelling for establishing domicile, so if the local tax authority provides a homestead credit or exemption, the non-primary residence would not receive it and you would pay the full assessed tax bill.
Are there any tax issues or flags when buying more than one house in the same area? I've got a really, really good friend who needs a place to live.. the second home I'm looking to buy would be like a townhouse or condo, for cash.
There are so many personal red flags flying. What happens if your second home needs a new roof (furnace, dishwasher, etc), will your friend pay for it?
What happens if your friend can't or won't pay rent? How landlord/tenant friendly is your state? Could a tenant be removed for non payment? Make sure you have a formal lease and a lawyer.
Just to reiterate what others have already pointed out:
1) The second house will be considered a rental, both by the IRS and by local rental ordinances, if any. As such, your tax returns will become more complicated. You'll need to account for depreciation and then be subject to depreciation recapture when you sell, even if you don't claim depreciation.
2) Your expenses on the second house will be higher. Your property taxes will likely be higher and your insurance will be higher. It will also be an extra property to maintain and to worry about.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
