Hidden tax issues when converting home to rental
Real estate has been one of those industries that is a “go-to” for wealth building. A lot of people buy houses to flip. Some buy houses as an investment property to rent out. Others buy properties as a primary residence, only to turn around and rent it out. The last one has become more popular with the “digital nomad” lifestyle.
A lot of baby boomers are retiring, if they’re not already retired. But many are not yet ready to be in full retirement mode. They have embraced the digital lifestyle and want to capitalize on the ability to travel and see the world while working. They are choosing to rent out their homes while away to not only have the extra income but not have the property be vacant while they are away.
Seems easy, right?
Well, there are hidden real estate tax issues when doing this since the property was purchased as personal property and not as an investment.
Gordon McNamee, CPA, wrote this article on this exact issue for Tax Buzz. He addresses the consequences of converting personal property to an income producing property. More importantly, he talks about it in layman's terms. This is a great article to forward to any of your clients who are thinking about doing this and just want a quick overview of all that goes into this process.
Do you have any clients that are thinking of turning their personal residence into a rental property? What issues did they encounter?