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Financial Planning / Tax Strategies


Subject:  Re: Q on Potential RE Transaction Date:  6/18/2014  3:56 PM
Author:  ptheland Number:  121018 of 127616

What you are contemplating is a short term rental that likely does not have a profit motive. That makes your tax reporting problematic. You'd report the rental income as other income (NOT on schedule E where rental real estate is usually reported), and any related expenses would be on schedule A. Since the ACA subsidy is based on AGI, the rental will increase your AGI even if you have enough expenses to offset the income.

Having said that, I like foo1bar's suggestion very much. And not just for the tax reasons. Once you buy the property, it's yours. If the former owners turned tenants don't take care of the place (and they no longer have any incentive to do so), whatever problems they cause become your problems. A contract to purchase, to be completed and closed in a few months would address that issue as well as your potential tax issue.

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