Should You Rent Your House?

104 14

    Tax Consequences

    • An article published by SmartMoney.com discusses the various tax issues involved with selling or renting a home. These considerations should weigh heavily on a person's decision to sell or rent the house. Selling the house allows the owner to qualify for a tax-free gain of up to $500,000 for a couple or $250,000 for singles; the idea is that the money earned from the sale would be put toward a new house and the taxpayer should not be penalized for needing to move from one place to another. Renting the home subjects the owner to taxable income --- the rent received is taxed at ordinary rates. However, as pointed out by SmartMoney.com, landlords may qualify for deductions on costs associated with the rental, including deductions for repairs and maintenance.

    The Rental Business and Landlord Tenant Laws

    • By leasing out a house, the owner is essentially forming a rental business, one that is subject to state landlord tenant laws. This means the owner must at least develop a minimal plan for the rental, such as drafting a lease agreement, determining how to screen tenants, determining what to charge for a security deposit and what to charge for rent and planning for inspection and repair of the property. Additionally, the owner must comply with the state's landlord tenant laws with regard to the required lease provisions, such as mandatory disclosures about mold or truth-in-renting statements. Renting the home may burden the owner with additional stress and duties that selling the house would avoid.

    Profit Analysis

    • Renting the home may bring in profits, but the owner should consider whether selling or renting the house is economically viable. Income earned from the rent must offset other costs associated with upkeep of the property and payment of the property taxes. Further, the owner must be able to afford both another place to live and to rent out the current home. Sites such as Forbes.com offer calculators and other tools owners can use to test the economic viability of selling versus renting.

    Sale versus Rent is an Individual Decision

    • Renting a house may not be the best option for some people. When determining whether to rent or sell the house, the question should ultimately be answered by weighing factors described above with the individual concerns and financial status of the owner. If renting the home is economically viable, and the owner is up to the task of being a landlord, renting may be a good option, especially in difficult housing markets.

Subscribe to our newsletter
Sign up here to get the latest news, updates and special offers delivered directly to your inbox.
You can unsubscribe at any time

Leave A Reply

Your email address will not be published.