Home owner looking to move to a rental

Asked by Sf_dad, San Francisco, CA Tue May 8, 2012

I'm a home owner looking to find a rental so that I can be close to my children's school as least for the next few years. I should be able to rent out my home for about the same price as I would pay for a rental elsewhere, thus minimizing my financial. But I notice there is a catch. The rental income to me is taxable, while the rent that I pay is not tax deductible. So I really lose out on tax. Anyone familiar with this situation and if you have any advice?

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Jed Lane, Agent, Petaluma, CA
Wed May 9, 2012
There are many tax ramifications that you should speak to a CPA to get advice. Realtors are not licensed to give you tax advice.
If the amount of the taxes you pay is enough of a hindrance to being where you want to be, you really should talk to an accountant to go over the ramifications.
1 vote
David Tapper, Agent, Burlingame, CA
Tue May 8, 2012
SF Dad, the only person who should answer this question is your CPA. If you need a referral to a good CPA in SF, call Regan Chinn 415-982-1096.


1 vote
Teresa Grobe…, Agent, San Francisco, CA
Fri Sep 28, 2012
Hi SF Dad,
I have looked at this same predicament as well. If your home still has a mortgage, the interest and any expenses and taxes are deductible from your rental income.
Here's some more information on the IRS rules on rental income http://www.irs.gov/publications/p527/index.html

Hope this is helpful. If you'd like help with renting your property out, I offer property management services for a flat rate ($50). If you would like to list your property, I can help with that and only charge a flat fee of $500 which includes listing to the MLS, taking photos and hosting open houses.

Best of luck,
Teresa Grobecker
0 votes
Astrid Lacit…, Agent, San Francisco, CA
Tue May 8, 2012
What you state is correct. But it is not as grim as it sounds: if you have a loan, the interest portion of the mortgage payment is tax deductible. You could also depreciated your rental property, thus increasing your deductions.

I would suggest you speak to an accountant.

Astrid Lacitis
Keynote Properties
415 860 0765
0 votes
Bob Evans, Agent, San Francisco, CA
Tue May 8, 2012
With Rent Control in SanFrancisco - why would you rent? Do an exchange with 2 years to pick your new home.
0 votes
It is true. I shouldn't bother to rent. The main reason I don't want to sell is I have a fairly low mortgage right now and it is a nice area I wish to return sometime.
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Gregory Karr, , San Francisco, CA
Tue May 8, 2012
When you move out of your current home it will then become a rental property, allowing you to claim depreciation. Yes, the rental income you will earn is taxable, but you will also have operating expenses to claim (real estate taxes, home insurance, utilities you may pay, maintenance and repairs, management fees, leasing fees, interest payments on your mortgage if you have one, etc.). You may end up with a taxable loss on your home even though you are actually generating a positive cash-flow.. If your taxable income is less than it is now, it may put you into lower overall tax bracket. If you have a home owner's real estate tax exemption now, that will be lost because the exemption only applies to owner occupied houses, and the real estate taxes on your home will increase accordingly. Not much though, because the exemption is only $7,000. If you have a tax accountant give him/her a call and they can forecast and calculate all the numbers for you so you can see what it will cost you. It's all pretty simple and not a big deal for your accountant.
0 votes
William Ng, Home Buyer, San Francisco, CA
Tue May 8, 2012
You can do a 1031 exchange and swap your current property with one at your new location. But you will lose out 6% to the realtors.

I am also interested if there are any way around this.
0 votes
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