Reply to crude tax question - if you are renting out your home for less than your mortgage...

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[quote=Anonymous][quote=Anonymous]The tax break is that you can deduct your mortgage interest. You can also claim depreciation on the property since it is now a rental property. But you can't claim a loss. Basically look at the difference between rent and mortgage as your cost to continue to own the property, presumably until the value increases and you can sell. [/quote]

This is essentially right.

Use Schedule E to report your rental income and expenses such as depreciation and mortgage interest.  I'm not sure if recently any legislation put a cap on mortgage interest deductions for rental properties - I doubt it, but check the Schedule E instructions for 2012 and also the IRS Publication for rental properties - it's like Ragu, it's in there.

You also need to do a Form 4562 to compute the depreciation (and you will need an accountant or software to get all this done).

You cannot, however, use any net loss on the place (like the $25,000 max allowance) to offset other income on your return due to your HHI being $300K.  But note that disallowed rental losses can be carried forward to be used in future years, so keep copies of your tax returns.  If nothing else, the losses can be used to offset taxable gain when you sell the place.[/quote]

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