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Subject:  Rental income losses for a few years, then quit? Date:  3/28/2005  5:16 PM
Author:  brxkic Number:  78093 of 127519

Hello there:

Just bought my house a few months ago. It turns out to be too much house for one person, so I am thinking of getting a roommate. I have read pub 527 from cover to cover, and searched both the Rental Property board and this Tax board for answers. Haven't found my answers yet, so here is my question.

The house has a lot of stuff that needs fixing (including upgrading electrical, replacing roof, duct work, just to name a few....). I know I would be depreciating these costs when I calculate rental income gain/loss. This would mean I'm more likely to make a loss on the rental income in the next 2 or so years where all these improvements are made. However, I am 30 and probably will be starting a family in the next couple of years (i.e. won't be renting out a room from my house for more than a few years since I (hopefully) will have a family by then).

Now my question, in a hypothetical scenario where there is a rental loss (for let's say for the next 3 years), and then I stop renting out the room because I start having a family.

-Does that mean this is a business that is "not for profit" because it didn't meet the rule about having to make a profit for 3 years out of the last five"?

-Would that mean I would only be able to deduct costs only to the amount of rental income I receive (i.e. not use the $25000 loss limit as "actively partiipating" in a rental real estate acitivity)?

-Since I can't predict how many years I would make a profit from rent, and when I am going to stop renting out (i.e. when exactly I am going to start a family), should I just forget about renting out a room?

Thanks a bunch!

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