House Hack Taxable Income Strategies for Next Step

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House Hack Taxable Income Strategies for Next Step

Cole Hagen
Rental Property Investor · Edwardsville, IL · Member since 2017 · 18 posts · 15 votes

Hello,

Earlier this year I purchased my first home with the intent to house hack it. I have only had one room mate over the past 6 months as I have been finishing the basement in order to add two more. My question revolves around how to claim this rental income on my taxes and strategies to do so. 

The obvious thought is to not claim any as it is my first property and there will be only around $4k in revenue this year anyway but my thought is that I can potentially claim and increase my taxable income which will raise my Debt/Equity ratio in order to purchase another SFH or small MFH next year. I also believe that I can depreciate my interest, taxes this year, and the $30k in repairs that I put in this property this year (please correct me if I am wrong).

I am currently collecting rent via Venmo as it is convenient for both me and my roommate and I also believe that this could be used to show proof of income (again, correct me if I am wrong). 

My main goal is to maximize my ability to purchase another property (3 is my goal) for next year using the BRRR method. I will have around $30k in savings and I can find properties anywhere from $50-150k in my area.

Anyway, I would appreciate anyone else's thoughts or feedback over this topic. 

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  • Kevin S.
    Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes
    7y

    @Cole Hagen my feedback would be:

    1) don't commit income tax fraud by purposefully under-reporting your income, I may be wrong, but I'm pretty sure the IRS rule is that other/misc. income in excess of $600 must be reported, and

    2) if you ignore 1) and do chose to not report it, it's probably not a great idea to post about the fact that you're considering doing so on a site where you have your full name posted, how easy would it be for a Google search to turn that info up or for someone to report you to the IRS based on this post?

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  • Cole Hagen
    OP
    Rental Property Investor · Edwardsville, IL · Member since 2017 · 18 posts · 15 votes
    7y

    @Kevin S. I completely understand that and apologize if I was unclear. I full intend to claim it but wanted to make a general stereotypical statement that when someone makes a relatively small amount of cash on the side, they don't claim it. In my case, I believe that it would actually be beneficial for me to do so.  

    I am more interested in learning about the best way to collect and report rental income and also learn any key things I need to do in order to make sure that it will count toward my yearly income so that I can qualify for additional loans in the future. 

    On top of this, I would like to hear advice on doing everything I can to accurately maximize my tax, repair, & closing cost deductions. 

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