Claiming depreciation

[Michael Osborne]

Hi Guys,

I am moving into a new home in December and will be renting out my current condo. I understand that if I list the condo during this Calendar year I will then be able to claim depreciation. Is it worth trying to get the property listed this year in order to claim depreciation if there is no income from the property for this year? Will the depreciation create a loss on the property that I can claim against my personal income?

Thanks,

[Logan Allec]

"Will the depreciation create a loss on the property that I can claim against my personal income?"

If you actively participate in the rental, i.e., you are exercising independent judgment with respect to the rental and not simply ratifying decisions made by a manager, then, you may deduct up to $25,000 of real estate losses in a given tax year if your modified adjusted gross income (basically your non-real estate related income, with a few tweaks) is less than $100,000.  If you make between $100,000 and $150,000, then this $25,000 number is reduced by $1 for every $2 that your modified adjusted gross income exceeds $100,000.  If your modified adjusted gross income is greater than $150,000, then you cannot deduct any real estate losses against your other income, unless you are a real estate professional in the eyes of the I.R.S., which it doesn't sound like you are.

Also, keep in mind that you would only get 1/2 month's worth of a full year's depreciation anyway if the property truly was placed in service in December.