Home Buying in 90026>Question Details

Ryan D, Home Buyer in 90026

Taxes on Subletting your Primary Residence Home? Is there one?

Asked by Ryan D, 90026 Sun Jan 17, 2010

If you sublet your primary residence, will you need to pay taxes on the revenue obtained from subletters?

Help the community by answering this question:


Any rent you recieve from someone not on the actual lease itself is considered to be rent, as well as any bills in your name that the sublessor pays is also counted as rent recieved. All ammounts recieved in this manner are considered taxable income.

I AM a Tax Proffessional.
Web Reference: http://www.irs.gov
0 votes Thank Flag Link Mon Jan 16, 2012
The tax equation is very complicated and depends on your tax status (High income vs low income and High income subject to AMT vs High Income self employed). The implications of doing the WRONG thing are expensive. If you do not have a tax professional and are considering this you MUST go and seek a consultation FIRST. I can say this in any stronger language in this forum.

Now the overview is this, the tax code is written for people who choose to be in the rental business to be IN the rental business for the long term. Once you pass 24 months beyond your live in ownership, the tax rules change and there is no turning back. The income is taxed based on the the home as a business. Income is offeset by expenses such as mortgage interest, maintenance, insurance and property tax. Then you get 1/27th of the depreciation of the home at your basis (this is formulaic), and if there is any income left then its taxes as income to you.
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Sun Jan 17, 2010
Hello Ryan,

If you rent out your primary residence it wouldn't be sub-letting. Subletting is when you lease something you are leasing out. From my personal experience, She-lee is correct. Rental income is taxable. You could also choose to make another home your primary residence. Are you renting it to purchase something else or to rent something else? You might consider making it an income property and purchasing another primary residence.

Monique Carrabba
The Carrabba Group
Keller Williams Holywood Hills
(323) 899-2900
Web Reference: http://www.thecarrabba.com
0 votes Thank Flag Link Sun Jan 17, 2010

As you already know, this is a perfect question to ask you tax accountant. This is a real estate site, not a tax site. So the best any of us can do is point you back towards your tax accountant and/or give you our personal experience as landlords.

I will share with you what I know from my personal experience as a landlord. Rental Income is taxable. Of course, you get to deduct all the expenses of the rental home against the income (ie. management fees, mortgage interest, insurance, taxes, maintenance, depreciation, etc.). If the net is positive, you pay taxes on the net income. If the net is negative, then in some circumstances (again, check with your tax accountant as this is different for each situation) you may have a passive income tax deduction against your regular income. There are limitations on the passive income tax deductions. There might also be considerations regarding depreciation and other deductions. Hope this helps you understand why you should be asking your personal tax accountant. Dare to Dream.

Shel-lee Davis, CDPE
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
0 votes Thank Flag Link Sun Jan 17, 2010
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