Rental properties in Connecticut are a good choice for many investors.  If you are considering purchasing a rental property or renting out your home, consult with a knowledgeable tax professional to verify how these new rules may apply to you.

Under the new tax law, you can get a tax break if you rent out your entire home or even a room in your home for at least 15 days in a given year.  As a short term landlord, you can get around the new law’s caps on deductions for property taxes and mortgage interest.  Example:  Your annual property taxes total $14, 000.  The new law allows you to deduct a maximum of $10,000 .  If you rent out 50% of your home for half the year, but use the home yourself for the other half,  you can deduct 50% of that six months’ worth of property taxes – or 25% of the total property tax bill, or $3,500 on federal Schedule E.  You can also deduct $10,000 on your Schedule A for itemized deductions, giving a total deduction of $13,500 rather than just the $10,000.

In addition, under the new law, for any first or second home you bought after 2017, you can deduct interest on up to $750,000 of the mortgage loan (compared with $1 million previously).  Rental property has no such cap.  If you rent out 50% of a home that carries a $900,000 mortgage, you can deduct interest paid on the first $750,000 of that loan as well as interest on the remaining $150,000.

If you choose the standard deduction rather than itemize, you can still take deductions corresponding to the amount of time your house, or a portion of it, was rented.  For more information, visit the IRS website or consult with a tax professional.

Thinking of a rental property for your own investment?   There are many options in lower Fairfield County.  Learn more by visiting LizTardifRealEstate.com or contact me directly at 203-246-9065.