I need some advice. As a personal finance enthusiast, I like to understand how taxes work for my personal situation. This year life changed. I accepted an offer in another state and we moved. Instead of seeing our house in Texas, we decided to rent it out to two of our close friends. They were looking for an affordable place and we figured they would take care of it and we could build some more equity. My understanding of the tax law is that we have 3 years after we started renting our primary home(we did live in it for 2.5 years) to decide whether we want to sell or not without taking a tax hit. As of right now we think we are going to keep the house long term. It’s in the city, good neighborhood, nice home.
So now taxes. We started renting the home at the end of July. Before we rented it, we actually made some investments in the home. Again job offer came out of the blue, so we had saved up money to make some improvements in the home. We spent $5K installing new HVAC in April and $4K installing new windows and sliding door for the backyard.
- How do I treat the expenses we made prior to renting the house?
- I read somewhere about establishing the market price of the house and log it in the books. Anyone understand this topic? Potentially could explain a bit more.
- Depreciation - Should I start taking depreciation?
I would really appreciate thoughts from people have gone from owning their primary home and renting it.