Possible to rent home "under the table"?

[Anonymous]

I just looked up the income level at which you can deduct rental losses. It starts to phase out at $100k and is completely gone at 150k.

[Anonymous]

Are you questioning the loss of your homestead deduction or income tax from the rental revenue?

[Anonymous]

Recommendation - do it "legally". This means in DC you need to get some license/permit The reason I recommend this is there is a house in our neighborhood that was rented out and tenants were jerks. The city went after the property owner who was claiming homestead for property tax rate AND the tenants needed to leave b/c the owner did not have it set up as a rental property.

Also - if you deduct things like depreciation, make sure you are working with a tax accountant who will help you now and in the future.

[Anonymous]

Anonymous wrote:Are you questioning the loss of your homestead deduction or income tax from the rental revenue?

If your housing is being covered temporarily, why not just keep your house vacant? How can you be sure you can get your tenants out when you want to move back? D.C. Laws are very favorable to tenants rights. Do your homework.

[Anonymous]

I read OP's question as whether they can rent out the house and not claim the rental income but also claim a deduction for the interest on the mortgage as though it were there primary residence.

[Anonymous]

If I were your accountant, I would not sign your tax return if you tell me you have rental income you aren't reporting. With your rental expenses and depreciation, you'll likely end up with a net loss. Depending on your income level, the loss may not be able to be used in the current year but it can be carried forward to offset future rental income or the gain when you sell (I'm being very basic). Also, as a pp said, since you're in DC you need to register in DC and file an unincorporated business tax return if your rents exceed $12,000.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Your mortgage holder may not approve.

Our neighbor tried to rent out his house and the mortgage company said no. He ended up selling.

Your mortgage company will not know that your house is rented out, so whatever was going on with this neighbor goes much deeper than what OP is talking about. Could be that there is an HOA involved here, specifically condo. The HOA can prevent an owner from renting out a property. We own a home that is now a rental but used to be our primary residence. When we turned it into a rental 15 years ago we did not tell our mortgage company. Not because we were trying to hide anything but because it was immaterial. We did however tell our home owners insurance company. If you rent out your home, or change the usage of that home in any way such as running a business out of it that will require you to have commercial traffic in and out of the house you will need to change the type of policy you have on the house. That is critical that you do this.

In terms of "under the table" - if you are living in another state and do not show that the house is being rented the IRS might wonder how in the world you are able to keep two households with your current income, without renting out one of the homes. But the IRS would have to have a reason to look. They have bigger fish to fry.

Also, your residence is based on where you earn your income. You can't just decide that you want to legally keep your residence in the state you used to live in just because you still have a home there.

As far as the mortgage company, it is not immaterial, or you would have told them.

As far as the IRS, it is also not immaterial, and the fact that it is happening, or suspected, is reason to investigate.

You made some sense regarding insurance - to a fault. Afraid of getting sued?

[Anonymous]

Anonymous wrote:If I were your accountant, I would not sign your tax return if you tell me you have rental income you aren't reporting. With your rental expenses and depreciation, you'll likely end up with a net loss. Depending on your income level, the loss may not be able to be used in the current year but it can be carried forward to offset future rental income or the gain when you sell (I'm being very basic). Also, as a pp said, since you're in DC you need to register in DC and file an unincorporated business tax return if your rents exceed $12,000.

x10000

[Anonymous]

If by under the table you mean:

1) Not report the rental income
2) Claim the mortgage interest deduction on your house as if you were still living there.

These are absolutely tax fraud and illegal.

[Anonymous]

Anonymous wrote:If by under the table you mean:

1) Not report the rental income
2) Claim the mortgage interest deduction on your house as if you were still living there.

These are absolutely tax fraud and illegal.

I think you could get away with this if you worked reasonably close to where your house is. If you and your spouse are across the country and try to claim a house here as your primary residence then the IRS might ask questions.

[Anonymous]

Anonymous wrote:Your mortgage holder may not approve.

Our neighbor tried to rent out his house and the mortgage company said no. He ended up selling.

Really?! I've never heard of this. Under what legal authority do they do this? I don't remember ever signing any language to this effect in either of my closings.

[Anonymous]

Possible, yes.
Legal, no.

Odds of getting caught, depends entirely on the situation. If say your sister needed to move and offered to cover your mortgage on your house while you were gone/ rent it for you, but didn't pay more you would have someone in the residence who could forward mail, the property would not be listed on any rental sites, etc, its highly unlikely you will show up on any radars. That doesn't mean it is ethical, or legal but its also not impossible at all.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What does your mortgage company have to do with renting your house? It's your house, not a condo.

The rent is definitely considered income, however, you can deduct a ton of stuff like management fees, repairs, anything. We did it for 3 years when we moved. It wasn't bad on our taxes. It actually helped a little b/c we wrote off so much stuff.

We definitely used a management company though. It helped significantly.

Don't cheat on your taxes. Do it above board and after depreciation and other deductions you'll probably come out ahead.

We had this experience. Our rental brought in income to cover the mortgage and taxes, but with the management company fee and repairs that needed to be made, we always had a deduction. Plus you can depreciate the value of the house until you sell or it's no longer a rental.

[Anonymous]

Anonymous wrote:I've been renting out my condo for the last seven years. My mortgage hasn't changed. I don't think they care.

Have you informed your lender? What's your mortgage rate? Usually rental properties have higher interest rates by about 1/8 to 1/4 percent.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Your mortgage holder may not approve.

Our neighbor tried to rent out his house and the mortgage company said no. He ended up selling.

Really?! I've never heard of this. Under what legal authority do they do this? I don't remember ever signing any language to this effect in either of my closings.

Many /most mortgages include language that the home is owner occupied.