How To Report
Bought new home. Old one is paid off and son still lives there and pays some rent cash.
Should I just treat this as a second home for taxes?
I could report income and treat, as a rental and only write off would be depreciation and repairs.
But is a possibility may have to sell in a couple of years. So I am not counting on the advantage of depreciation since I would have to recapture this if sold.
So treat as a rental or second home?
Thanks
I protested my taxable values in May 08, the county tax appraisers took until 2009 to finalize the values, this is a hurricane Ike area, and also other considerations.
Property Texas are higher in Texas than many places, especially in Harris County, 3-4% of total value. We pay annually usualy due Jan 31st, MUD, School, Fire, County, College Dist. etc. etc. etc. etc. I live in NM now, my taxes are 1/2 as much as I paid in Houston, and I have twice the house. [ Edited by scottgray on Date 02/16/2009 ]
Your lender paid the taxes from your escrow account. You get a 1098 each year that shows the amount of mortgage interest paid and may also show the amount of property taxes deducted from your escrow account. The IRS also has a copy of your 1098
If the 1098 shows the taxes were paid in 2008, then take the deduction on your 08 taxes. Otherwise, you have to wait until 09, when you will probably have a double payment shown on your 1098.
In summary, do whatever your documentation will support.
Like Newkid stated, you have to take the deduction in the year you paid it. If you paid 2008 taxes in the year 2010, that is when you take the deduction. If you have owned the property for more than a year, then you should be able to take the tax deduction for any property taxes you paid in 2008 for prior years.
If you just purchased the property in 2008, then I assume he taxes were prorarted at closing so you have not physically paid any taxes yet.
Accrual Accounting, in my opinion, is a hassle and not worth it for Real Estate. I believe it is more suited to manufacturing situations where you have inventory constantly in motion. For example, if you have a tenant who does not pay you rent, with the accrual method, you would have to recognize this rent as income until after 60, 90, 120 days when it could be written off as a bad debt.
Pay your Texas taxes (Ha!) now and deduct next year.
Good luck.
JS.[ Edited by smithj2 on Date 02/16/2009 ]
need a pro... like your accountant .. or like NewKid...
Watch for others to post to. Here is some of my info:
1. Google IRS for much reading material.
2. Your buddy does a Sch C because he is a realtor and therefore self employed.
3. Rental Real Estate uses Sch E .
4. Buying a property and then improving it causes the improvement to be a) added to the cost basis b) added to depreciated value
5. There are some details of what is an improvement and what is a repair ... once your property is placed in service. --Read more