Many of our clients rent out their Sarasota properties to help cover expenses and to benefit from some tax breaks. But to get those tax breaks, owners should be careful. Basically the IRS treats your beachfront villa as either a residential property or a rental property. A residential property is one you personally use either more than 14 days a year or for more than 10 percent of the rental days, whichever is greater. On a residential home, you can deduct expenses up to the amount of the rental income for the year. But you can’t deduct losses. But expenses not used can be carried forward.
A rental property is one you use for 14 days a year or less. Even if you use it for more than 14 days, its still considered a rental if your personal use doesn’t exceed 10% of the days it is rented. Taking deductions for a rental property can get confusing, but here’s a list of items you need to be aware of…
You can deduct expenses such as mortgage interest, property taxes and insurance. You can write off passive losses such as maintenance, repairs and depreciation. Passive loss deductions are likely to be limited to $25,000, but they can be carried forward. Passive loss deductions decrease as your income grows. If your adjusted gross income ( AGI ) is more than $100,000, you can deduct less than $25,000. With an AIG over $150,000, you can deduct passive losses only if you have other income. Confused ? Give us a call and we will put you in touch with an expert.
941-993-3160. PatrickDoherty @ MichaelSaunders.com