Tax advantages ... will I still be able to claim?

Question

Quick question ...

I'm buying an investment rental property. For a few years we are going to let the inlaws rent it out for about 1/3 of the rental value. $500 vs $1,500.

Since we choose to have this house in a negative cash flow situation, will we still be able to write off expenses?

Bob Norton · Answer

@Rick Hoffart Rental losses between related parties are generally not deductible.

Natalie Kolodij · Answer

Colddddddd lol

Talk to your tax pro- if your rental generates losses you may or may not be able to utilize them due to your AGI.

If you can't use them, may not be terrible to rent to them for 1/3 price if that keeps family happy. Because as mentioned above you can only deduct enough to get your rental income/loss to $0. No additional loss.

But if that rental operating normally would generate a $8k loss on paper, and you could use that $8k loss to reduce your income from your w-2 jobs and pay less tax....ehhhh that may be worth it to charge them fair market rents.

Basit Siddiqi · Answer

@Rick HoffartYou should look to charge fair market value rent and then your expenses will be deductible.

Bob Norton · Answer

@Rick Hoffart You will only be able to deduct the expenses up to your rental income.  Any expenses in excess of your rental income from related parties is not deductible.  For instance if your rents are $6,000 for the year and your total expenses are $10,000, then you can only deduct $6,000 of the expenses, so that your rental income is zero and the other $4,000 in expenses are not deductible.  To get around this, you must rent to related parties at fair market rents and be able to document that what you charged in rents are comparable to going market rents.

Rick Hoffart · Answer

Oh yes, I wasn't clear. Besides the lost in rent. Can I still claim other normal deductions? Upkeep, maintenance, repairs, improvements ... etc.

Tax advantages ... will I still be able to claim?

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