depreciation when room rented 3 days of week
removep...@yahoo.com
house, for the entire year. The depreciation is 25% of 1/27.5 of the
cost basis excluding land. Now say the room is only rented out 3 days
a week; is the depreciation then 3/7 of the amount in the previous
sentence?
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Arthur Kamlet
removep...@yahoo.com <removep...@yahoo.com> wrote:
>Suppose we rent a room, 25% of the square foot area of the whole
>house, for the entire year. The depreciation is 25% of 1/27.5 of the
>cost basis excluding land. Now say the room is only rented out 3 days
>a week; is the depreciation then 3/7 of the amount in the previous
>sentence?
Unless it is explicitley taken out of service 4 days each week,
and made not available to be rented, I would assume it is available
for rental the whole week.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
D. Stussy
news:hggqi5$bc9$1...@reader1.panix.com...
> In article
<128362ac-0acc-47ba...@u25g2000prh.googlegroups.com>,
> removep...@yahoo.com <removep...@yahoo.com> wrote:
> >Suppose we rent a room, 25% of the square foot area of the whole
> >house, for the entire year. The depreciation is 25% of 1/27.5 of the
> >cost basis excluding land. Now say the room is only rented out 3 days
> >a week; is the depreciation then 3/7 of the amount in the previous
> >sentence?
>
> Unless it is explicitley taken out of service 4 days each week,
> and made not available to be rented, I would assume it is available
> for rental the whole week.
Only "day care facilities" have to limit such by amount of time used.
Regardless, the whole amount will still fall under the Section 280A
limitation, so it's likely that you will have no current year deduction
(but do get to carry the unused amount forward).
removep...@yahoo.com
wrote:
> "Arthur Kamlet" <kam...@panix.com> wrote in message
> > >Suppose we rent a room, 25% of the square foot area of the whole
> > >house, for the entire year. �The depreciation is 25% of 1/27.5 of the
> > >cost basis excluding land. �Now say the room is only rented out 3 days
> > >a week; is the depreciation then 3/7 of the amount in the previous
> > >sentence?
>
> > Unless it is explicitley taken out of service 4 days each week,
> > and made not available to be rented, I would assume it is available
> > for rental the whole week.
>
> Only "day care facilities" have to limit such by amount of time used.
> Regardless, the whole amount will still fall under the Section 280A
> limitation, so it's likely that you will have no current year deduction
> (but do get to carry the unused amount forward).
What limitation are you talking about?
Arthur Kamlet
removep...@yahoo.com <removep...@yahoo.com> wrote:
>On Dec 18, 1:29�pm, "D. Stussy" <spam+newsgro...@bde-arc.ampr.org>
>wrote:
>> "Arthur Kamlet" <kam...@panix.com> wrote in message
>
>> > >Suppose we rent a room, 25% of the square foot area of the whole
>> > >house, for the entire year. �The depreciation is 25% of 1/27.5 of the
>> > >cost basis excluding land. �Now say the room is only rented out 3 days
>> > >a week; is the depreciation then 3/7 of the amount in the previous
>> > >sentence?
>>
>> > Unless it is explicitley taken out of service 4 days each week,
>> > and made not available to be rented, I would assume it is available
>> > for rental the whole week.
>>
>> Only "day care facilities" have to limit such by amount of time used.
>> Regardless, the whole amount will still fall under the Section 280A
>> limitation, so it's likely that you will have no current year deduction
>> (but do get to carry the unused amount forward).
>
>What limitation are you talking about?
If you operate a day care business out of your home, your OIH expenses are
limited to not only the portion of the home used, but the hours of
operation as a day care business.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
Mark Bole
> On Dec 18, 1:29 pm, "D. Stussy" <spam+newsgro...@bde-arc.ampr.org>
> wrote:
>> "Arthur Kamlet" <kam...@panix.com> wrote in message
>>>> Suppose we rent a room, 25% of the square foot area of the whole
>>>> house, for the entire year. The depreciation is 25% of 1/27.5 of the
>>>> cost basis excluding land. Now say the room is only rented out 3 days
>>>> a week; is the depreciation then 3/7 of the amount in the previous
>>>> sentence?
Sounds like this would be subject to the same rules as a vacation home.
You have two methods to pro-rate expenses (IRS and Tax Court) and
expenses are limited to income.
Does the "room" include its own kitchen and bath facilities? If not,
it's hard to see how the "rental" is not used by the landlord for
personal use at least part of the time.
>>> Unless it is explicitley taken out of service 4 days each week,
>>> and made not available to be rented, I would assume it is available
>>> for rental the whole week.
OK, suppose it *is* available for rental the other 4 days of the week.
How many weeks or months or years would you give the landlord to find a
tenant for these days before concluding that the landlord didn't have a
profit motive (i.e. rental not-for-profit)? I'm assuming in fact that
it will be almost impossible to find a tenant for just those other four
days of the week. A landlord trying to make a profit would surely
continue looking for a full-time tenant to replace the part-time one.
Unless running a lodging or boarding facility, which would be a Schedule
C activity....
>> Regardless, the whole amount will still fall under the Section 280A
>> limitation, so it's likely that you will have no current year deduction
>> (but do get to carry the unused amount forward).
>
> What limitation are you talking about?
The limitations that apply to either "vacation" homes ("dwelling unit is
used by the taxpayer during the taxable year as a residence") or
not-for-profit rentals.
-Mark Bole
Seth
Mark Bole <ma...@pacbell.net> wrote:
>Does the "room" include its own kitchen and bath facilities? If not,
>it's hard to see how the "rental" is not used by the landlord for
>personal use at least part of the time.
Wouldn't that be the other way around? If the room lacks those
facilities, the tenant uses other space part of the time.
If the _only_ such facilities in the house are in that room, _then_
the landlord presumably uses it.
Seth
Mark Bole
> In article <hgisj2$mpi$1...@news.eternal-september.org>,
> Mark Bole <ma...@pacbell.net> wrote:
>
>> Does the "room" include its own kitchen and bath facilities? If not,
>> it's hard to see how the "rental" is not used by the landlord for
>> personal use at least part of the time.
>
> Wouldn't that be the other way around? If the room lacks those
> facilities, the tenant uses other space part of the time.
And presumably the landlord uses the same rented "other space" the
remainder of the time.
It comes down to facts and circumstances, but I think it would be a real
stretch to claim this arrangement is a pure for-profit rental with no
personal use.
-Mark Bole
Seth
Mark Bole <ma...@pacbell.net> wrote:
>Seth wrote:
>> In article <hgisj2$mpi$1...@news.eternal-september.org>,
>> Mark Bole <ma...@pacbell.net> wrote:
>>
>>> Does the "room" include its own kitchen and bath facilities? If not,
>>> it's hard to see how the "rental" is not used by the landlord for
>>> personal use at least part of the time.
>>
>> Wouldn't that be the other way around? If the room lacks those
>> facilities, the tenant uses other space part of the time.
>
>And presumably the landlord uses the same rented "other space" the
>remainder of the time.
So what? If you rent out 25%, and share 20%, and personal use 55%,
then the 25% rented counts, and the 20% shared doesn't.
Seth
removep...@yahoo.com
> removeps-gro...@yahoo.com wrote:
> > On Dec 18, 1:29 pm, "D. Stussy" <spam+newsgro...@bde-arc.ampr.org>
> >>>> Suppose we rent a room, 25% of the square foot area of the whole
> >>>> house, for the entire year. �The depreciation is 25% of 1/27.5 of the
> >>>> cost basis excluding land. �Now say the room is only rented out 3 days
> >>>> a week; is the depreciation then 3/7 of the amount in the previous
> >>>> sentence?
>
> Sounds like this would be subject to the same rules as a vacation home.
> � You have two methods to pro-rate expenses (IRS and Tax Court) and
> expenses are limited to income.
Right, in this case the depreciation (which I guess is an expense)
would be 3/7 of the normal total.
> Does the "room" include its own kitchen and bath facilities? �If not,
> it's hard to see how the "rental" is not used by the landlord for
> personal use at least part of the time.
The landlord doesn't want to have a person around all the time. The
person will often not be there on the weekends, and will just be there
most of the weekdays. That was the landlord gets some space. The
rent paid is about 3/7 of the normal monthly rent -- or a little bit
more (because of the principle that when you buy in bulk you get a
discount). I think these people are called "commuter renters". The
room will not be rented out on other days, nor will the landlord use
it for personal use, as the renter's stuff is there.
Try the following search in google
"commuter renter" site:sfbay.craigslist.org
It looks for HTML pages that have the word "commuter renter" in them
and are on the website sfbay.craigslist.org, which is a classifieds
listing website. The search results will change everyday.
> >>> Unless it is explicitley taken out of service 4 days each week,
> >>> and made not available to be rented, I would assume it is available
> >>> for rental the whole week.
>
> OK, suppose it *is* available for rental the other 4 days of the week.
> How many weeks or months or years would you give the landlord to find a
> tenant for these days before concluding that the landlord didn't have a
> profit motive (i.e. rental not-for-profit)? �I'm assuming in fact that
> it will be almost impossible to find a tenant for just those other four
> days of the week. �A landlord trying to make a profit would surely
> continue looking for a full-time tenant to replace the part-time one.
>
> Unless running a lodging or boarding facility, which would be a Schedule
> C activity....
>
> >> Regardless, the whole amount will still fall under the Section 280A
> >> limitation, so it's likely that you will have no current year deduction
> >> (but do get to carry the unused amount forward).
>
> > What limitation are you talking about?
>
> The limitations that apply to either "vacation" homes ("dwelling unit is
> used by the taxpayer during the taxable year as a residence") or
> not-for-profit rentals.
--
Seth
removep...@yahoo.com <removep...@yahoo.com> wrote:
>The landlord doesn't want to have a person around all the time. The
>person will often not be there on the weekends, and will just be there
>most of the weekdays. That was the landlord gets some space. The
>rent paid is about 3/7 of the normal monthly rent -- or a little bit
>more (because of the principle that when you buy in bulk you get a
>discount). I think these people are called "commuter renters". The
>room will not be rented out on other days, nor will the landlord use
>it for personal use, as the renter's stuff is there.
That is, the renter has exclusive use of the room full time. The
renter's use is limited in some ways (number of guests, number of
hours/days of personal occupancy, etc.) but that doesn't affect the
fact that the renter is the _sole_ user of the room full time, by
contract.
Seth
Mark Bole
>>>> Does the "room" include its own kitchen and bath facilities? If not,
>>>> it's hard to see how the "rental" is not used by the landlord for
>>>> personal use at least part of the time.
>>> Wouldn't that be the other way around? If the room lacks those
>>> facilities, the tenant uses other space part of the time.
>> And presumably the landlord uses the same rented "other space" the
>> remainder of the time.
>
> So what? If you rent out 25%, and share 20%, and personal use 55%,
> then the 25% rented counts, and the 20% shared doesn't.
So what to your "so what". Are you claiming that this situation is not
that of a "dwelling unit [...] used by the taxpayer during the taxable
year as a residence"? (Recall that a dwelling unit includes sleeping,
toilet, and cooking facilities.)
Apparently the answer to my first question is no, the room does not
include its own kitchen and probably not even its own bathroom. The
room is not a dwelling unit. Therefore, even if the not-for-profit
rental rules don't apply, the vacation home rules do.
-Mark Bole
Mark Bole
>> rent paid is about 3/7 of the normal monthly rent -- or a little bit
>> more (because of the principle that when you buy in bulk you get a
>> discount). I think these people are called "commuter renters". The
>> room will not be rented out on other days, nor will the landlord use
>> it for personal use, as the renter's stuff is there.
>
> That is, the renter has exclusive use of the room full time. The
> renter's use is limited in some ways (number of guests, number of
> hours/days of personal occupancy, etc.) but that doesn't affect the
> fact that the renter is the _sole_ user of the room full time, by
> contract.
If you rent someone a room (which is not a dwelling unit) full time but
only charge 3/7's of FMV rent, that is pretty much the definition of not
for profit rental.
D. Stussy wrote:
> Regardless, the whole amount will still fall under the Section 280A
> limitation, so it's likely that you will have no current year deduction
> (but do get to carry the unused amount forward).
Agreed. And the depreciation is carried forward separately and is still
not allowed in excess of rental income in a future year. So to answer
the original question, take depreciation based on 7 days per week but
don't expect any significant tax benefit from it.
-Mark Bole
Wallace
"Mark Bole" <ma...@pacbell.net> wrote in message
news:hgmk08$n5l$1...@news.eternal-september.org...
> The
>>> rent paid is about 3/7 of the normal monthly rent -- or a little bit
>>> more (because of the principle that when you buy in bulk you get a
>>> discount). I think these people are called "commuter renters". The
>>> room will not be rented out on other days, nor will the landlord use
>>> it for personal use, as the renter's stuff is there.
>>
>> That is, the renter has exclusive use of the room full time. The
>> renter's use is limited in some ways (number of guests, number of
>> hours/days of personal occupancy, etc.) but that doesn't affect the
>> fact that the renter is the _sole_ user of the room full time, by
>> contract.
>
> If you rent someone a room (which is not a dwelling unit) full time but
> only charge 3/7's of FMV rent, that is pretty much the definition of not
> for profit rental.
wouldn't FMV for such a commuter rental be 3/7's of the FMV of a full time
rental?
Are you saying the IRS has the discretion to tell you how to rent your
property?
Mark Bole
> "Mark Bole" <ma...@pacbell.net> wrote in message
>> If you rent someone a room (which is not a dwelling unit) full time but
>> only charge 3/7's of FMV rent, that is pretty much the definition of not
>> for profit rental.
>
>
> wouldn't FMV for such a commuter rental be 3/7's of the FMV of a full time
> rental?
>
> Are you saying the IRS has the discretion to tell you how to rent your
> property?
>
No, never said that. But the IRS can certainly challenge whether you
have a profit motive. If you do not have a profit motive, that is the
worst combination: income is fully taxable on Form 1040 line 21, while
expense deductions (other than mortgage interest and property tax) are
limited to income and further limited by only being deductible subject
to 2%-of-AGI limitation on Schedule A.
Really, what this whole thing boils down to is a roommate
expense-sharing situation, and I would hazard to guess that in the vast
majority of such situations, net taxable income ends up at zero. Or, as
someone on another discussion board likes to say, you're rolling around
an empty barrel.
-Mark Bole
Seth
Mark Bole <ma...@pacbell.net> wrote:
>> That is, the renter has exclusive use of the room full time. The
>> renter's use is limited in some ways (number of guests, number of
>> hours/days of personal occupancy, etc.) but that doesn't affect the
>> fact that the renter is the _sole_ user of the room full time, by
>> contract.
>
>If you rent someone a room (which is not a dwelling unit) full time but
>only charge 3/7's of FMV rent, that is pretty much the definition of not
>for profit rental.
FMV rent is for full-time usage.
The rental here is for full-time possession but only fractional-time
usage. The FMV rent for "you may leave your possession here all the
time, but only sleep here 3 nights a week" is not the same as FMV rent
for "you may sleep here 7 nights a week".
Seth
removep...@yahoo.com
> Wallace wrote:
> > "Mark Bole" <ma...@pacbell.net> wrote in message
> >> If you rent someone a room (which is not a dwelling unit) full time but
> >> only charge 3/7's of FMV rent, that is pretty much the definition of not
> >> for profit rental.
>
> > wouldn't FMV for such a commuter rental be 3/7's of the FMV of a full time
> > rental?
>
> > Are you saying the IRS has the discretion to tell you how to rent your
> > property?
>
> No, never said that. But the IRS can certainly challenge whether you
> have a profit motive. If you do not have a profit motive, that is the
> worst combination: income is fully taxable on Form 1040 line 21, while
> expense deductions (other than mortgage interest and property tax) are
> limited to income and further limited by only being deductible subject
> to 2%-of-AGI limitation on Schedule A.
There is a profit motive. See, if you never rent your room you make
$0. If you rent your room 3 days of the week and charges 3.5/7 on the
normal monthly rent, you make a cool $5000 a year.
> Really, what this whole thing boils down to is a roommate
> expense-sharing situation, and I would hazard to guess that in the vast
> majority of such situations, net taxable income ends up at zero. Or, as
> someone on another discussion board likes to say, you're rolling around
> an empty barrel.
Roommate expense sharing makes sense to me when there's no mortgage.
Then each person pays their half, or 75%/25%. But things are
complicated when there is a mortgage. One person owns the house and
has to make the mortgage principal, mortgage interest, and property
tax payments -- and that one person will get the deductions on their
Schedule A or E.
Wallace
"Seth" <se...@panix.com> wrote in message
news:hgr4ba$l1o$1...@reader1.panix.com...
> In article <hgmk08$n5l$1...@news.eternal-september.org>,
> Mark Bole <ma...@pacbell.net> wrote:
>
>>> That is, the renter has exclusive use of the room full time. The
>>> renter's use is limited in some ways (number of guests, number of
>>> hours/days of personal occupancy, etc.) but that doesn't affect the
>>> fact that the renter is the _sole_ user of the room full time, by
>>> contract.
>>
>>If you rent someone a room (which is not a dwelling unit) full time but
>>only charge 3/7's of FMV rent, that is pretty much the definition of not
>>for profit rental.
>
> FMV rent is for full-time usage.
>
> The rental here is for full-time possession but only fractional-time
> usage. The FMV rent for "you may leave your possession here all the
> time, but only sleep here 3 nights a week" is not the same as FMV rent
> for "you may sleep here 7 nights a week".
so what? It is the FMV for what is being offered.
Seth
Wallace <please...@microsoft.com> wrote:
>"Seth" <se...@panix.com> wrote in message
>news:hgr4ba$l1o$1...@reader1.panix.com...
>> In article <hgmk08$n5l$1...@news.eternal-september.org>,
>> Mark Bole <ma...@pacbell.net> wrote:
>>>If you rent someone a room (which is not a dwelling unit) full time but
>>>only charge 3/7's of FMV rent, that is pretty much the definition of not
>>>for profit rental.
>>
>> FMV rent is for full-time usage.
>>
>> The rental here is for full-time possession but only fractional-time
>> usage. The FMV rent for "you may leave your possession here all the
>> time, but only sleep here 3 nights a week" is not the same as FMV rent
>> for "you may sleep here 7 nights a week".
>
>so what? It is the FMV for what is being offered.
That's my point. The fact that it's 3/7 of FMV for something else is
irrelevant.
Seth
Stuart A. Bronstein
> Mark Bole <ma...@pacbell.net> wrote:
>> Wallace wrote:
>>
>> > Are you saying the IRS has the discretion to tell you how to
>> > rent your property?
>>
>> No, never said that. But the IRS can certainly challenge
>> whether you have a profit motive. If you do not have a profit
>> motive, that is the worst combination: income is fully taxable
>> on Form 1040 line 21, while expense deductions (other than
>> mortgage interest and property tax) are limited to income and
>> further limited by only being deductible subject to 2%-of-AGI
>> limitation on Schedule A.
>
> There is a profit motive. See, if you never rent your room you
> make $0. If you rent your room 3 days of the week and charges
> 3.5/7 on the normal monthly rent, you make a cool $5000 a year.
>From the perspective of the IRS, profit means net positive income -
more profit than there is loss.
>> Really, what this whole thing boils down to is a roommate
>> expense-sharing situation, and I would hazard to guess that in
>> the vast majority of such situations, net taxable income ends
>> up at zero. Or, as someone on another discussion board likes
>> to say, you're rolling around an empty barrel.
>
> Roommate expense sharing makes sense to me when there's no
> mortgage. Then each person pays their half, or 75%/25%. But
> things are complicated when there is a mortgage. One person
> owns the house and has to make the mortgage principal, mortgage
> interest, and property tax payments -- and that one person will
> get the deductions on their Schedule A or E.
Exactly. When there's no mortgage, there's unlikely to be tax
implications from sharing expenses more or less equally.
But when there is a mortgage, the owner technically has taxable
income to the extent the roommate pays rent.
--
Stu
http://downtoearthlawyer.com
Wallace
> In article <hgr4h8$du6$1...@news.eternal-september.org>,
> Wallace <please...@microsoft.com> wrote:
>>"Seth" <se...@panix.com> wrote in message
>>news:hgr4ba$l1o$1...@reader1.panix.com...
>>> In article <hgmk08$n5l$1...@news.eternal-september.org>,
>>> Mark Bole <ma...@pacbell.net> wrote:
>
>>>>If you rent someone a room (which is not a dwelling unit) full time but
>>>>only charge 3/7's of FMV rent, that is pretty much the definition of not
>>>>for profit rental.
>>>
>>> FMV rent is for full-time usage.
>>>
>>> The rental here is for full-time possession but only fractional-time
>>> usage. The FMV rent for "you may leave your possession here all the
>>> time, but only sleep here 3 nights a week" is not the same as FMV rent
>>> for "you may sleep here 7 nights a week".
>>
>>so what? It is the FMV for what is being offered.
>
> That's my point. The fact that it's 3/7 of FMV for something else is
> irrelevant.
>
> Seth
ok, I lost track of who said what. Seems to me this is a for profit
activity, but the rules pertaining to renting a portion of a house you also
use will come into play.
removep...@yahoo.com
> "Seth" <se...@panix.com> wrote in message
> >>>>If you rent someone a room (which is not a dwelling unit) full time but
> >>>>only charge 3/7's of FMV rent, that is pretty much the definition of not
> >>>>for profit rental.
>
> >>> FMV rent is for full-time usage.
>
> >>> The rental here is for full-time possession but only fractional-time
> >>> usage. 锟絋he FMV rent for "you may leave your possession here all the
> >>> time, but only sleep here 3 nights a week" is not the same as FMV rent
> >>> for "you may sleep here 7 nights a week".
>
> >>so what? 锟絀t is the FMV for what is being offered.
>
> > That's my point. 锟絋he fact that it's 3/7 of FMV for something else is
> > irrelevant.
>
> > Seth
>
> ok, I lost track of who said what. 锟絊eems to me this is a for profit
> activity, but the rules pertaining to renting a portion of a house you also
> use will come into play.
Right, square footage of room divided by square footage of entire
house. However, the rule pertaining to number of days rented does not
apply (after reading the other posts I figure this is the gist of the
arguments) because the room will have their stuff in it for all 7 days
of the week, will not be available for the landlord or anyone else to
use, and just the person's physical presence is in the room 3 days a
week.
removep...@yahoo.com
wrote:
> "removeps-gro...@yahoo.com" <removeps-gro...@yahoo.com> wrote:
> > Mark Bole <ma...@pacbell.net> wrote:
> >> Wallace wrote:
> >> > Are you saying the IRS has the discretion to tell you how to
> >> > rent your property?
>
> >> No, never said that. �But the IRS can certainly challenge
> >> whether you have a profit motive. �If you do not have a profit
> >> motive, that is the worst combination: income is fully taxable
> >> on Form 1040 line 21, while expense deductions (other than
> >> mortgage interest and property tax) are limited to income and
> >> further limited by only being deductible subject to 2%-of-AGI
> >> limitation on Schedule A.
>
> > There is a profit motive. �See, if you never rent your room you
> > make $0. �If you rent your room 3 days of the week and charges
> > 3.5/7 on the normal monthly rent, you make a cool $5000 a year.
>From the perspective of the IRS, profit means net positive income -
>more profit than there is loss.
Does this mean rental income minus expenses (excluding depreciation)
should be greater than zero? Or rental income minus expenses
(including depreciation) should be greater than zero. For people
renting their entire house these days, if their house was purchased
during the boom, then using the second way they still have a loss.
But depreciation has to be recaptured, so it's as if it didn't exist.
Mark Bole
> Right, square footage of room divided by square footage of entire
> house. However, the rule pertaining to number of days rented does not
> apply (after reading the other posts I figure this is the gist of the
> arguments) because the room will have their stuff in it for all 7 days
> of the week, will not be available for the landlord or anyone else to
> use, and just the person's physical presence is in the room 3 days a
> week.
Well, we still disagree on that. To reiterate, it's not about the
*landlord's* use of the room, it's about the *tenant's* use of the same
bathroom and kitchen as the landlord -- that's what makes the Sec. 280A
limitations apply, just as D. Stussy indicated earlier.
Unless the tenant brings his own chamber pot along and empties it off
the property, the rental clearly includes use of a dwelling unit
(kitchen/toilet/sleeping) which is also used by the landlord as a home.
Under Sec. 280A, this means expenses will be limited to rental income.
For a typical property in San Francisco and the $5K rental you
mentioned, I suspect that a pro-rated amount of the mortgage/property
tax deduction will get used up on Schedule E, maybe a little of the
insurance and utilities (pro-rated) will be allowed, and probably
nothing allowed for depreciation (the latter two unallowed amounts
carried forward but still probably not allowed in a future year either).
Net result is all the rental income is taxable with no significant
rental expenses to offset it (since mortgage/property tax would have
gone on Schedule A anyway). Compare this to the situation of a renter
who sublets a room (roommate expense sharing), where all the taxable
income instead passes through to the landlord and it's a net wash to the
primary tenant. The difference is, the landlord who lives in a separate
property gets to deduct *all* the expenses (but subject to his own
passive loss limitations).
If you think about it, it's really no different than the limitation of
Office In Home (OIH) deduction to the net profit from the corresponding
business or trade on Form 8829. In both cases, you can't take part of
your own home and start deducting personal expenses and depreciation in
excess of your profit (after mort/proptax deduction), simply because you
use it for a business activity. For that, you need to have a separate
piece of business-use property. For the landlord, an in-law type unit
with its own kitchen/bath and separate entrance would certainly qualify
for that, which is why I asked you that question in the very beginning
of this thread.
Of course, if you had one of those, you most likely wouldn't be renting
it only three days/week.
-Mark Bole
Seth
Mark Bole <ma...@pacbell.net> wrote:
>removep...@yahoo.com wrote:
>
>> Right, square footage of room divided by square footage of entire
>> house. However, the rule pertaining to number of days rented does not
>> apply (after reading the other posts I figure this is the gist of the
>> arguments) because the room will have their stuff in it for all 7 days
>> of the week, will not be available for the landlord or anyone else to
>> use, and just the person's physical presence is in the room 3 days a
>> week.
>
>Well, we still disagree on that. To reiterate, it's not about the
>*landlord's* use of the room, it's about the *tenant's* use of the same
>bathroom and kitchen as the landlord -- that's what makes the Sec. 280A
>limitations apply, just as D. Stussy indicated earlier.
I think I'm beginning to understand now: If the tenant pays, say,
$300/week, then perhaps $250 is for the use of the private room
(including occupancy for 3 days and storage for 7 days/week), and the
other $50 is for the shared usage of kitchen and bathroom.
>Unless the tenant brings his own chamber pot along and empties it off
>the property, the rental clearly includes use of a dwelling unit
>(kitchen/toilet/sleeping) which is also used by the landlord as a home.
>
>Under Sec. 280A, this means expenses will be limited to rental income.
That's for the $50 part, and not the $250 part, right?
Or can't the rental be split that way?
Seth
Mark Bole
> I think I'm beginning to understand now: If the tenant pays, say,
> $300/week, then perhaps $250 is for the use of the private room
> (including occupancy for 3 days and storage for 7 days/week), and the
> other $50 is for the shared usage of kitchen and bathroom.
I'd be careful about claiming a rental of storage space, because then
the question arises, are you providing services related to the storage,
such as security?
>> Unless the tenant brings his own chamber pot along and empties it off
>> the property, the rental clearly includes use of a dwelling unit
>> (kitchen/toilet/sleeping) which is also used by the landlord as a home.
>>
>> Under Sec. 280A, this means expenses will be limited to rental income.
>
> That's for the $50 part, and not the $250 part, right?
>
> Or can't the rental be split that way?
My understanding is no, a dwelling unit is a dwelling unit -- you can't
separately rent out the components. (Unless, as mentioned in Pub 527,
you are using the property as a "hotel, motel, inn, or similar
establishment", in which case I suspect we would be talking about a
Schedule C activity).
As a practical matter, I predict that in an audit, if your rental
address is the same as your residence address, and you didn't move
during the year, and you are trying to claim losses in excess of income,
you are going to have problems.
-Mark Bole
--
Mark Bole
removep...@yahoo.com
> removeps-gro...@yahoo.com wrote:
> > Right, square footage of room divided by square footage of entire
> > house. �However, the rule pertaining to number of days rented does not
> > apply (after reading the other posts I figure this is the gist of the
> > arguments) because the room will have their stuff in it for all 7 days
> > of the week, will not be available for the landlord or anyone else to
> > use, and just the person's physical presence is in the room 3 days a
> > week.
>
> Well, we still disagree on that. �To reiterate, it's not about the
> *landlord's* use of the room, it's about the *tenant's* use of the same
> bathroom and kitchen as the landlord -- that's what makes the Sec. 280A
> limitations apply, just as D. Stussy indicated earlier.
>
> Unless the tenant brings his own chamber pot along and empties it off
> the property, the rental clearly includes use of a dwelling unit
> (kitchen/toilet/sleeping) which is also used by the landlord as a home.
>
> Under Sec. 280A, this means expenses will be limited to rental income.
> For a typical property in San Francisco and the $5K rental you
> mentioned, I suspect that a pro-rated amount of the mortgage/property
> tax deduction will get used up on Schedule E, maybe a little of the
> insurance and utilities (pro-rated) will be allowed, and probably
> nothing allowed for depreciation (the latter two unallowed amounts
> carried forward but still probably not allowed in a future year either).
How come you say nothing will be allowed for depreciation? Where on
Schedule E form or instructions do they mention the section 280A
limitations?
> Net result is all the rental income is taxable with no significant
> rental expenses to offset it (since mortgage/property tax would have
> gone on Schedule A anyway).
So should the owner just put all of the mortgage interest and property
tax on Schedule A, and all of the rent income on Schedule E, with
rental expenses being part of
> Compare this to the situation of a renter
> who sublets a room (roommate expense sharing), where all the taxable
> income instead passes through to the landlord and it's a net wash to the
> primary tenant. �The difference is, the landlord who lives in a separate
> property gets to deduct *all* the expenses (but subject to his own
> passive loss limitations).
>
> If you think about it, it's really no different than the limitation of
> Office In Home (OIH) deduction to the net profit from the corresponding
> business or trade on Form 8829. �In both cases, you can't take part of
> your own home and start deducting personal expenses anddepreciationin
> excess of your profit (after mort/proptax deduction), simply because you
> use it for a business activity. �For that, you need to have a separate
> piece of business-use property. For the landlord, an in-law type unit
> with its own kitchen/bath and separate entrance would certainly qualify
> for that, which is why I asked you that question in the very beginning
> of this thread.
>
> Of course, if you had one of those, you most likely wouldn't be renting
> it only three days/week.
--
Mark Bole
>> Under Sec. 280A, this means expenses will be limited to rental income.
>> For a typical property in San Francisco and the $5K rental you
>> mentioned, I suspect that a pro-rated amount of the mortgage/property
>> tax deduction will get used up on Schedule E, maybe a little of the
>> insurance and utilities (pro-rated) will be allowed, and probably
>> nothing allowed for depreciation (the latter two unallowed amounts
>> carried forward but still probably not allowed in a future year either).
>
> How come you say nothing will be allowed for depreciation? Where on
> Schedule E form or instructions do they mention the section 280A
> limitations?
Here is where they mention it:
http://www.irs.gov/instructions/i1040se/ch02.html#d0e356
Instructions for Schedule E, Form 1040, Line 2, note especially use of
technical term "dwelling unit", which the IRS defines to include
kitchen, toilet, and sleeping facilities:
"If you rented out a dwelling unit that you also used for personal
purposes during the year, you may not be able to deduct all the expenses
for the rental part. �Dwelling unit� (unit) means a house, apartment,
condominium, or similar property. [...]
"If you checked �Yes� and rented the unit out for at least 15 days in
2009, you may not be able to deduct all your rental expenses. You can
deduct all of the following expenses for the rental part on Schedule E.
* Mortgage interest.
* Real estate taxes.
* Casualty losses.
* Other rental expenses not related to your use of the unit as a
home, such as advertising expenses and rental agents' fees.
"If any income is left after deducting these expenses, you can deduct
other expenses, including depreciation, up to the amount of remaining
income. You can carry over to 2010 the amounts you cannot deduct. "
>> Net result is all the rental income is taxable with no significant
>> rental expenses to offset it (since mortgage/property tax would have
>> gone on Schedule A anyway).
>
> So should the owner just put all of the mortgage interest and property
> tax on Schedule A, and all of the rent income on Schedule E, with
> rental expenses being part of [sic]
Almost. You should put the pro-rated part of mortgage interest and
property tax on Sched. E, the remainder on Schedule A.
-Mark Bole
removep...@yahoo.com
> > How come you say nothing will be allowed fordepreciation? �Where on
> > Schedule E form or instructions do they mention the section 280A
> > limitations?
>
> Here is where they mention it:
>
> http://www.irs.gov/instructions/i1040se/ch02.html#d0e356
>
> Instructions for Schedule E, Form 1040, Line 2, note especially use of
> technical term "dwelling unit", which the IRS defines to include
> kitchen, toilet, and sleeping facilities:
>
> "If you rented out a dwelling unit that you also used for personal
> purposes during the year, you may not be able to deduct all the expenses
> for the rental part. �Dwelling unit� (unit) means a house, apartment,
> condominium, or similar property. [...]
>
> "If you checked �Yes� and rented the unit out for at least 15 days in
> 2009, you may not be able to deduct all your rental expenses. You can
> deduct all of the following expenses for the rental part on Schedule E.
>
> � � �* Mortgage interest.
> � � �* Real estate taxes.
> � � �* Casualty losses.
> � � �* Other rental expenses not related to your use of the unit as a
> home, such as advertising expenses and rental agents' fees.
>
> "If any income is left after deducting these expenses, you can deduct
> other expenses, including depreciation, up to the amount of remaining
> income. You can carry over to 2010 the amounts you cannot deduct. "
So then we come to my original question -- what is the value of
depreciation? If the room is 20% of the entire house, is the
depreciation 20% of the full value (where full value is if the entire
house were rented), or 3/7 of 20%?
If the house is paid for, purchased long ago so that the property tax
via prop 13 is very low, then there is still money left over for
depreciation and the pro-rated condo and utility fees.
If the house were purchased recently, then the pro-rated mortgage
interest and real estate taxes could easily be the entire $5000, or
maybe more. What happens to the carried over depreciation and pro-
rated condo fees? Well the instructions they can be used next year.
But what if the entire house is sold next year? Then the carried over
depreciation can be used to cancel out the 25% recapture tax, right?
And what if the house is sold at a loss? Then can the carried over
depreciation and pro-rated condo fees be used to produce negative
income on line 1 of 1040? In an earlier post you said that the
carryover may be lost forever -- and I don't understand that.
> >> Net result is all the rental income is taxable with no significant
> >> rental expenses to offset it (since mortgage/property tax would have
> >> gone on Schedule A anyway).
>
> > So should the owner just put all of the mortgage interest and property
> > tax on Schedule A, and all of the rent income on Schedule E, with
> > rental expenses being part of [sic]
>
> Almost. �You should put the pro-rated part of mortgage interest and
Mark Bole
> So then we come to my original question -- what is the value of
> depreciation? If the room is 20% of the entire house, is the
> depreciation 20% of the full value (where full value is if the entire
> house were rented), or 3/7 of 20%?
I gave my answer umpteen posts ago -- calculate full-time depreciation.
> If the house is paid for, purchased long ago so that the property tax
> via prop 13 is very low, then there is still money left over for
> depreciation and the pro-rated condo and utility fees.
>
> If the house were purchased recently, then the pro-rated mortgage
> interest and real estate taxes could easily be the entire $5000, or
> maybe more. What happens to the carried over depreciation and pro-
> rated condo fees? Well the instructions they can be used next year.
But only against the same personal-use-rental-income. If you don't have
an increase in income, you will just accumulate more unused carryover
every year. Even though not a passive activity, the carryover is
treated similar.
> But what if the entire house is sold next year? Then the carried over
> depreciation can be used to cancel out the 25% recapture tax, right?
I think you would simply not account for the depreciation that was not
allowed in the first place.
> And what if the house is sold at a loss? Then can the carried over
> depreciation and pro-rated condo fees be used to produce negative
> income on line 1 of 1040? In an earlier post you said that the
> carryover may be lost forever -- and I don't understand that.
No, I don't think so. As I said previously, just like with an OIH,
using part of your home for business does not by itself generate net tax
losses. (Allowing, of course, for the split of always-deductible
mortgage interest and RE (real estate) tax between Schedule A and
Scheds. C/E).
So, for example, if your pro-rated insurance and utilities were never
allowed because they were in excess of the annual rental income (or OIH
income) after mort/RE tax, then you never get to use them as a tax
deduction. Depreciation that was never allowed is just that --
depreciation not allowed or allowable.