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So you think you have a rental property?

So you think you have a rental property?

 Five factors identified by the Tax Court to help in this classification for rental property taxation. 

Many times a house or condo is purchased for personal use and then converted to income-producing property.

As an income-producing property (rental), there may be significant tax benefits.

  •  Operating costs are tax deductible.
  • When sold, the sale is treated as a capital loss.

But to just say that the house is a rental is not enough.

The tax court has provided five factors to assist in making this determination.

  1. Length of time the house was occupied by the taxpayer as his residence before placing it on the market for sale;
  2. Whether the individual permanently abandoned all further personal use of the house;
  3. Character of the property (recreational or otherwise);
  4. Offers to rent;
  5. Offers to sell.

The best way to successfully manage the operation and/or sale of a “rental” is to understand the factors and document the support of the factors.

If you have further questions, please contact Bruce Andersen, MS (Tax), CPA,   by email or by phone at 818-225-8022.