I own a single family home that I rented out. The house was too big for me. Now I live in an apartment that I pay rent for. Is the rent I pay in the apartment deductible against the rent I receive from my primary home?
A: The quick answer to your question is no. You are renting out your primary residence – which by the way is no longer a primary residence. It’s your investment property.
The rent you receive from the house can be offset by the expenses of owning the investment property.
For example , let’s assume your monthly mortgage interest payment on your investment property is $1,000 and your maintenance and upkeep and taxes are another $500 per month, the costs of the property are $1,500 per month. If you are receiving $2,000 in income per month from the property, you can offset all but $500. That’s $6,000 in income you’ll have to report to the IRS.
The amount you pay for your personal residence is completely separate and cannot be used as a deduction. For more details, including information about how depreciation fits into the investment property picture, please consult your tax preparer. Also, the IRS has several booklets to assist you with information. You can download this information at www.IRS.gov.
While on the one side you have income from the rents you receive, on the other side you’ll be deducting the mortgage payments on the rental property. For investment properties, you’ll have certain deductions that you can’t take if the property or home is your primary residence or otherwise is not considered an investment property. You may need a good accountant to help you sort through the deductions you may take and the income you must report.