My family lives in my other house

[House35]

I have a mother and brother that live in a house I own (it has a mortgage). I live in my own house with my wife and child. Is it a benefit or am I even able to use the home my mother and brother live in as a rental to them? Additionally, if I have it as a rental and I change from a rental to something else. How do I treat it? If it is not a rental is it considered a second home? Vacation home? I do not stay there.

Thanks in advance,

[myerstaxes]

My Questions for you are...

Does your family pay rent to you on the other house?
If so, is the rent at fair rental value?
If they do not pay rent, is there a mortgage on the house? If it is, does your family pay the mortgage directly to the mortgage company? Do they pay all of the expenses of the home, or do you? The answers are important before an accurate answer can be provided...

[taxea]

My family lives in my other house

Do you prepare taxes??? If not why are you here??? If so, read Pub 17 taxea

[mblatour]

Taxea....

I don't mean to be rude, but can't someone come on this board to just ask a simple question? If you don't want to answer it, maybe someone else does, so therefore you can just skim past it and find a more challenging one for you to answer. We're all here to learn from one another. I for one find it a blessing to have found a place where I can come and learn from others (and possibly help too). I just hate to see someone put down for asking a question that to you may be simple, but for them is not. I just had to say it. Hopefully I won't take a beating too.

P.S. The reason I felt the need to say something, is based on the fact that sometimes these simple questions are answered rather quickly; which can be very helpful during busy tax season. And I may have pondered them at one time or another myself.

[BOB W]

I don't find this question simple. The first question should be, Is it rented "for profit"? I believe the answer is NO. That is where it starts to get complicated for the owner.

[Bees Knees]

This is the type of question where there is no clear answer, without getting all of the details. I suggest House35 should obtain the services of an Enrolled Agent, CPA, or other competent tax professional to discuss the situation, or purchase a copy of TheTaxBook sold by the sponsors of this message board and review the information on rental properties in Tab 7.

[myerstaxes]

I agree Bob and Bees

Which is why I asked a series of questions in response to his/her question...Put my former Revenue Agent hat on...Many times people think a question has a slam dunk answer...I audited many on this issue, and of course made many many adjustments as a result...I agree, hire a professional...

[House35]

My family pays me market value rent on which I have made a small profit the last 2 years. I pay all of the expenses (mortgage, taxes, repairs).

I am trying to decide which is best and what the tax implications might be to:

1. Continue renting and making a small profit.
A. Get hit with depreciation recapture?
2. Stop renting and consider the house a second home (not sure of the tax implications) and utilize my family as dependents (if they meet the qualifications).

Anyone have any thoughts on the choices?

[veritas]

I don't understand your question

If you collect rent you have money to pay your expenses. If you don't collect rent you will have to earn more money or deplete your savings to pay the expenses.

help me understand?

[House35]

Looking strictly at the tax side am I better off claiming a profit from the rental with a depreciation recapture? Or am I better off having/claiming a second home (that I do not live in) and claim my family as dependents?

[veritas]

Don't know

Would have to analyze.

best to hire someone local.

[Gary]

Dependents?

If your mother and brother are paying you rent, they must have income from somewhere. Your brother doesn't live with you. How could you take him as a dependent?

[myerstaxes]

My thoughts are...

My family pays me market value rent on which I have made a small profit the last 2 years. I pay all of the expenses (mortgage, taxes, repairs).

I am trying to decide which is best and what the tax implications might be to:

1. Continue renting and making a small profit.
A. Get hit with depreciation recapture?
2. Stop renting and consider the house a second home (not sure of the tax implications) and utilize my family as dependents (if they meet the qualifications).

Anyone have any thoughts on the choices?

Hire a tax professional in your local area...Then you will have the opportunity to sit down and discuss your particular situation and make an informed decision on what is the best position to take...Good Luck