Home Owner who wants to buy a new home. What tax issues do I have to consider if I rent out my current home?

Question

I have owned and lived in my town house now for 2 and a half years. I have an opportunity to invest in a new home, so I have been considering renting out the home I already own to live in the new house. This is completely new to me and I've heard that tax wise I am setting myself up for a disaster. I'm told by my accountant that as soon as I make my home a rental, it changes the value to what the market currently says it is worth (which is obviously much less than what I bought it for 2.5 years ago). Can this be true? Unless I actually call an appraiser out, how could I possibly be changing the value of my home just because I'm renting it? I am also told that I can't write off both mortgages at the same time. Can anybody who knows California rental tax laws please contact me? I'm having trouble finding info on my own. Thanks!

Answer 1

I disagree with your acct.  ASK him to show you the tax

law that backs up what he says.

Renting out your home will make your rented home a non-primary

residential property and subject to taxes on the capital gains

and on the money collected BFD!  [big, freaking deal]

IT does not change the value of the property whatever.

YOU can write off any mortgages but you will be writing them off

differently; one has a biz expense, the other as a deduction

from your federal income tax schedule.

lastly, most accts know  but forget to remind their

clients of this important component of tax law;

tax law is based on what you do throughout a full year.

YOU could have a huge capital gains GROSS obligation

and then, Research and Development loses in your

new real estate investment company, and thus, owe nothing

on the taxable gains because you also suffer a loss.

So, one takes the taxes owed per event throughout the year

and then, finds deductions and write-offs and

tries to balance them off each other with the object for the

tax payer to wind up with a new obligation of zero!

I teach my students of investments, to ask the

tax adviser NOT what do I owe, but instead,

what must I do to NOT owe anything!

Answer 2

if you have an accountant and he/she has told you what you need to know, why are you on here asking us ???

You aren't having trouble, you want someone to do your work for you...ask your accountant.

Answer 3

you can be sure if you call a CPA

renting now can be dangerous/

economy is going to lure the wrong type renter