New to Real Estate · San Jose · Member since 2021 · 16 posts · 14 votes
Hi All, I am buying a property to use it as house hack ( using one room and renting the others), the property is 360K worth, I want to calculate how much tax deductible I can get, whether that deductible offset, the 7.25% interest I am getting. Here is my calculation, 360K - 72K ( land value) = 288K, and 288K/ 27.5 ( considering , it rented for the whole year) = 10.45K , so I can deduct 10.45K from deprecate and I will be paying 20,866 in interests for that whole 12 months so total I can make about 31K in deductible minus 12K standard deductible I take, so I will have additional 19K in deductible for my normal standard deductible ( which is 12K) which is that almost cover all the interest payment I made that year. Considering I rented the house for the whole year, are my calculation correct? What happen's if the property have not been rented for 2 months after rented for couple of months, did I need to consider deductible only when it rented or even when it in between rents also thanks. What about not fully rented, I mean from the 3 bedroom , if only one rented?
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
3y
This is where talking to a tax professional will help, and is totally worth the cost.
Your depreciation expenses seem to be calculated correctly. I am less clear how about the "standard deductible" for living in a house you are also renting.
But, you are missing a LOT of other potential deductions. Repairs, maintenance, utilities, and other items are normally deductible on a rent property. This is why you will likely make more money by paying for a tax professional to help you.
This is where talking to a tax professional will help, and is totally worth the cost.
Your depreciation expenses seem to be calculated correctly. I am less clear how about the "standard deductible" for living in a house you are also renting.
But, you are missing a LOT of other potential deductions. Repairs, maintenance, utilities, and other items are normally deductible on a rent property. This is why you will likely make more money by paying for a tax professional to help you.
what I mean by "standard deductible" , IRS Standard deduction, 12K for individual. What about my mortgage interest deductible, I can deduct all the interest that I pay that year right. I know the expenses, deductibles also, I just want to see, how it works with those two first.
Lender · Fort Lauderdale, FL (Lending in FL CT GA MI PA) · Member since 2022 · 470 posts · 349 votes
3y
Agree with getting a CPA for the final calculations, but a couple of comments. If you are living in one of the rooms you will not be able to take the full depreciation deduction as some of it will be considered personal use. Same for taxes and interest, they will be split into personal deductions and rental deductions. The pieces that are considered rental deductions can be taken against rental income. The 12k personal deduction is separate and will be compared to your personal share of taxes and interest and you will get to take the higher of the two.