I have bought a property in the college town where my daughter is now a sophomore. She'll will be living in it (let's say free) along with 3 other renters.I will report the rental income of the three, and it looks like I should be able to take 3/4 of the expenses on Rental Schedule E, and the remainder of the mortgage and property tax on Schedule A. Is this correct? Are there any pitfalls I should look out for?***Great idea!! It's worked well for many! The only thing to be concerned about would be the capital gains, sometime down the road, if you decide to sell the place. As with any investment, you may have a large gain or a large loss, depending on the market.In the meantime, it's likely you'll have a nice tax break as you build equity in the property. Of course, you must be aware that you are expected to be collecting fair rental value in order to use Schedule E.If you were to rent below fair rental value, you would have to report your income on line 21 of Form 1040, deduct your interest and taxes on Schedule A of your tax return, and deduct expenses (subject to a 2% reduction based on Adjusted Gross Income) on Schedule A, as well, but only to the extent of your income."Jack"
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