Discussion:Does renting part of home fall under vacation home rules?
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Discussion Forum Index --> Tax Questions --> Does renting part of home fall under vacation home rules?
| 23 March 2007 | |
| Hello. From what I read in Pub 527, renting out one room in your personal residence all year would go to Schedule E, allocating indirect and direct expenses. To me, it looks like you could deduct a passive loss (up to $25K if active participation). It's hard to tell if the Vacation Home Rules, which disallow any losses, apply. Would they only apply to a home that you rented out part of the year, and then used personally part of the year.
Or am I wrong? Any thoughts? Thanks. | |
| 23 March 2007 | |
| Hmmm...active participation to make it non passive for renting out a room in your home? Is this assisted living or just renting out a room to a roommate? | |
| 23 March 2007 | |
| Vacation Home Rules do not apply to a year - round rental. | |
| 23 March 2007 | |
| This is just renting to a roomate. I assumed active participant because he chose the tenant, the terms, etc. Or maybe there is rule that the $25K allowance can't apply to part personal/part rental property? As an aside, are practitioners being agressive or conservative on this active participation rule?
Larry0434, regarding your comment, that is how I read it, but can you cite where it specifically says that? Thanks. | |
| 23 March 2007 | |
| This is certainly not active participation in rental activity...sorry stevo.... | |
| 23 March 2007 | |
| Sandysea - I don't want to argue, I just want to learn. All I can find on "Active Participation" in the Master Tax Guide, and "The Tax Book", is that it is less stringent than "Material Participation", and that the individual participates in making management decisions. If I was renting out a room in my house, I sure as **** would be involved in making management decisions. I wouldn't let anyone else approve the tenants, etc.
What am I missing? Other than owning at least 10% of all interests in the activity, I don't see any specific numbers (hours,etc.) in the active participation rules. | |
| 23 March 2007 | |
| Certainly wouldn't be anyone else more involved, time or otherwise. | |
| 25 March 2007 | |
| Stevo, if Sec. 280A(c)(5) vacation home rule applies to the rented portion of the home, then the passive activity rules simply do not apply. Sec. 469(j)(10). Thus, if the rented portion of the home is rented out at fair market value to someone who uses it as his principal residence, then the Sec. 469 passive activity rules would apply and the loss would be deductible under the $25,000 special allowance rule. However, if the rented portion of the home is not rented at fair rental value to an individual who uses it as his principal residence, the Sec. 280A vacation home limits apply and no loss is allowable at all (other than allocable interest and taxes). | |
| 25 March 2007 | |
| Thanks Riley2. Under theis client's circumstances, it sounds like vacation home rule does not apply. Does anyone else agree with Sandysea that the owner absolutely couldn't be an active participant in a rental activity? It's not like he's renting to a relative for $100/month. It's a fmv rental. | |
| March 26, 2007 | |
| I agree with Riley (but I wasn't thinking of all the Section numbers). The allowable loss depends on whether renting at FMV or lower than FMV. | |
| 27 March 2007 | |
| Sandysea-Please help. Please elaborate on why you are sure that this is not active participation in a rental activity. Do you have a code section, or something you could point me to. I don't want to get this wrong, but others think it might be OK. Thanks. | |
| 27 March 2007 | |
| He can be materially active if he provides personal services to the tenant:
year round house cleaning, cooking, maintenance, and etc :P | |
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