Renting your home while cruising...advice?

[staceyneil]

Hi all,

We''ve rented our house out in preperation for our 1-2 year cruise. Totally forgot to budget in taxes on the rental income into our cruising budget! Yikes! I just figured, the rental income pays the mortgage, so we''re even. Unfortunately not.

What''s the best way to file the taxes for this? My (very vague) understanding is that you can either file it as a for-profit venture, and get into depreciation and all that (which''ll entail keeping our accountant to file it for us, even MORE expense I hadn''t budgeted for!!!) or filing as "not-rented-for-profit" where you still have to pay the tax but it''s a simpler filing procedure and I can do it myself.

I might be wrong about those. Maybe there is an even better option.

But basically, we are on a VERY tight cruising budget, so even a couple hundred dollars will be a big deal. And a surprise expense of a thousand or something will be crippling. We''ll have no other income to speak of, other than maybe less than a couple hundred bucks interest on a MM account...(the kitty).

Any advice from those who''ve been there?

Thanks
Stacey
www.sailnamaste.com

[almostbroke]

Hey again Stacey- There is one more bad bit of news when renting out the house. In most states you will lose your homestead exemption. That means your property tax may be a little higher than before. If I remember correctly, if you live in your house on Jan 1, you still get the exemption for that year, and it would be lost the following year. We live in Florida, it most likely is different in other states.
The hard part is keeping track of all the expenses you can deduct. We ended up going with a realtor(for 10%!). It took a good chunk of the kitty, but we have had no problems or headaches since renting almost two years ago. While it is rented is also the time to replace anything you have been putting off, i.e.; refrigerator, furnace,...because you can deduct the expense. We are going to replace the long neglected carpet just before moving back in(not too soon before!).
Jim
Jim

[DuaneIsing]

Stacey,

First let me wish you all the best on your cruise - I have been following your refit for a while now.

As to the rental situation, the only info I can offer is that we have always showed a net loss in rentals. The on-paper depreciation of the building (over 27.5 years) is usually enough to ensure that your bottom line for tax purposes will be a loss. So, in all our rental situations we have saved on taxes, never paid more because of it.

Hopefully, you can get more definitive answers in time to make your decisions.

Best to you!

Duane

[smsather]

Stacey -- Get tax software. I use TurboTax, so can recommend it, but other software may work just as well. The $40 is well worth it. It can guide you through all of the stuff on taxes for renting out your home. As was said, as long as you have a mortgage, are paying taxes, and depreciating it, almost always you get a "tax loss" which means more money back to you. The software does all the calculations, you just feed in the numbers (that you would have to get to the accountant anyway). Don''t fret, just do it soon so you know for sure what the situation is. Good luck! -- Steven

[duffer1960]

That is exactly what we are doing right now. We rented out our house last July 1st. I bought TurboTax Premier and it walked me through everything. The previous posters are correct; we ended up showing a loss and almost doubled our refund(compared to showing no income from rental and writing off the home deductions as we have normally done). By renting out your house and claiming depreciation and any other deductions you can, you should come out ahead.