Does my income or how much i pay in the mortgage come into play?
Lemon Law Attorney
You probably want to ask your accountant this question. You are not likely to get tax advices on this sight?
Your rental income, minus expenses, will be taxable. The perentage depends on your overall income. Talk to a CPA.
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First, you really need to provide all of the finacial information to your tax preparer to get an accurate answer. That being said, you may generally consider that the amounts you receive as rent will be taxable income. You are generally able to right of your expeses for the rental. Those expenses would include a portion of your utitilies to the extent that the utilities are avaialbe to your tenant. For example, water, garbage and electricity would be included but not the telephone unless your tenant is also sharing the use of your telephone. The portion that would be generally considered expenses of the rental would be determined by a ratio of the square footage of the amount rented to the total square footage of the home. I suggest that you discuss with your taxpreparer how to fine tune that for common areas as the kitchen and bathroom. The amount paid for the mortgage and proerty taxes does not really effect this analysis. You already have a deduction for property taxed and home mortgage interest as being paid for your principal residence. Finally, you can consider depreciating a portion of the home as a rental using the same formula. I generally recommend that you not do that as you will lose the special tax treatment for your principle residence for the portion of your home depreciated when you sell later. Without depreciating a portion of your home as a rental, your first $250,000 for a single person or $500,000 for a married couple is tax free when you sell your home. Depreciating a portion of your home no longer qualifies for that special treatment and the depreciation taken will probably not be that significant. Once again, please review your specific situation and numbers with a qualified tax professional An anser such as this is only as good as the accuracy and completeness of the information provided.