Guidance on Tax Filing and Mortgage Considerations

[Jordan Hamilton]

Hi everybody!

I purchased my primary residence in Tennessee in March 2024. However, due to my wife's pregnancy, we decided it would be best to move back to Miami to be closer to family in June 2024.

Recently, I conducted a cost segregation study on the property shortly after converting to a STR (converted June 1 2024), and I want to ensure I file my taxes correctly and legally given this change in circumstances. My understanding is that typically, a homeowner must live in the property for at least a year before converting it to a rental. However, exceptions may be made for extenuating circumstances like mine.

Additionally, I have a great relationship with my lender and secured favorable terms on my current loan. When I approach them for financing on my next property, I want to avoid raising any red flags due to my relocation and the status of my Tennessee home via how I file taxes in 2024 (i.e STR instead of my primary as it was originally intended).

Would it make sense to abort filing the cost seg for this Property in 2024 and list it as my primary to avoid issues on my next purchase? The idea is to not "wake sleeping dogs" and while at the same time not having issue on my next purchase.

Could you provide guidance on how to navigate this situation from both a tax and mortgage perspective so I won't have issues getting my next property? Please let me know if you need any additional details.

Thank you so much!

Jordan

[Raymond J. Rodrigues]

Welcome back to Miami @Jordan Hamilton! 

Interesting case you have here from a mortgage standpoint. The fact that you moved from your primary residence three months after purchasing may seem a bit strange to your current lender, especially with you potentially having it classified as an investment property in the same calendar year. Of course, it was due to extenuating circumstances which neither you nor the lender had control of. Depending on the way their company operates, you filing your property as an investment on your taxes may be considered an issue for them depending on how stringent they are. Other lenders as a new relationship may not care as much because they were not the ones that originally funded your loan and would not yet deem you as a risk. Occupancy fraud is not something lenders are too fond of, even if you went about things in an understandable way. Having the property on your tax returns will help to wipe the mortgage expense with proposed rental income, making it easier to qualify for your next primary residence purchase. If not, you may have to qualify with the full mortgage payment against your debt to income ratio, including the new home that you are looking to purchase.

From a tax standpoint, you may want to speak with @Natalie Kolodij.