Home Loan

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home equity lines of

Home Equity Lending Gaps in Texas The Texas Economy March 2003 "Texans need and deserve the right to take out home equity lines of credit.This simple change will pump $741 million back to Texas homeowners." -- Carole Keeton Strayhorn, Texas Comptroller Home Equity Lending Gaps in Texas The number of Texans with home equity loans has more than doubled since 1997 when changes in the Texas constitution made it easier for Texans to borrow against the equity they have in their homes. [1] Yet, Texans are still not taking as many home equity loans as residents in other states. In the traditional home equity lending market—the segment that involves a lump-sum payout of equity to be repaid over a set term—Texans seem to have caught up with the rest of the nation. Indeed, the estimated 6.4 percent of Texas home-owners with traditional home equity loans in 2001 is not only up considerably from 2.5 in 1997 but may well be higher than the average for the other 49 states of 5.7 percent (Figure 1). [2] This most likely reflects the fact that one portion of the home equity loan market—the home equity line of credit market—remains unavailable to Texans. An estimated $12.7 billion in higher-cost, non-tax-deductible loans that currently exist could be supplanted if home equity lines of credit were available and Texans used these financial options at the same rate as other consumers in the country. By taking advantage of a substantially untapped resource, Texas consumers could save $741 million annually using home equity lines of credit instead of other loans. These savings could be pumped into the Texas economy through lower interest rates and additional federal income tax deductions. The gains would be realized in the Texas economy if existing loans were merely paid off by homeowners through home equity lines of credit. This need not expand homeowners’ overall debt burden. Home Equity Lending in Texas For more than 160 years, access to the home equity that owners had built up in their residences was largely untapped. As a direct result of the Panic of 1837, Texas prohibited the forced sale of homesteads for all but a very limited number of reasons. When Texas became a state, these protections became part of the state constitution and effectively barred foreclosing on a person’s residence for reasons other than non-payment of taxes, the original mortgage or a home improvement loan. These same provisions also effectively barred tapping into home equity for purposes other than home improvement. But on November 4, 1997, Texas voters approved a constitutional amendment allowing more leeway in home equity lending and for reverse mortgages. [3] These loans became available to Texans in 1998, but some technical issues limited the availability of home equity loans for homesteads larger than one acre and from reverse mortgages. Subsequent amendments addressed these legal concerns. [4] Changes in the Texas Constitution expanded the conditions under which homeowners could obtain a traditional home equity loan. These closed-end loans extend for a specified length of time and generally require repayment of interest and principal in equal monthly installments. Interest rates on these loans are ordinarily fixed for the life of the loan. Growth in Home Equity Lending in Texas Since changing the Texas constitution to allow wider use of home equity loans, Texans have steadily increased their reliance on these loans. According to American Housing Survey (AHS) data on nine Texas metropolitan areas that cover 68 percent of Texas’ owner-occupied homes, only 2.5 percent of Texas homeowners had any form of home equity loan in 1997, substantially less than the 14.5 percent for all U.S. homeowners outside of Texas that same year. By 1999, the proportion of Texas homeowners with a home equity loan had risen to 4.5 percent. While this represents nearly a doubling of home equity loan usage in just two years, this was still slightly less than the estimated 5 percent rate for home equity loan usage in the nation and substantially less than the 12.9 percent estimated by the AHS that year for both home equity loans and lines of credit. By 2001, the proportion of Texas households with home equity loans had reached 6.4 percent. At this level, the usage in Texas actually exceeded the usage rate of fixed-term closed-end loans in the U.S., indicating that Texans may have reached the saturation point with traditional home equity loans. These loans typically are written for a set amount to be repaid in equal installments over a specified time, just like a traditional mortgage. Based on a survey conducted for the Comptroller of Public Accounts of home equity lenders in Texas, from 1998 to 2000, the amount of the average home equity loan was about $36,750. In 2001 and 2002, the average home equity loan jumped to more than $47,000. [5] Closing the Gap Although Texans’ reliance on home equity loans has grown substantially since the passage of the constitutional amendment, further gains may be unlikely. Other states’ average usage of 14 percent in 2001 included both traditional home equity loans and home equity lines of credit, financial instruments not now available to Texas homeowners. The possibility that the usage rate of traditional home equity loans in Texas exceeded the usage rate of similar loans in the nation probably indicates that without the home equity line of credit option, more homeowners are opting for the fixed term loans—their only other choice. During much of the 1990s, about 8 percent of U.S. homeowners had a home equity line of credit whereas about 5 percent of homeowners had a traditional loan. [6] In 2001, AHS data indicated an estimated 8.4 percent of homeowners had a home equity line of credit (HELOC) and 5.7 percent had traditional home equity loans. This newer form of home equity lending has become the preferred choice by homeowners in other states. A HELOC is a revolving account that permits borrowing from time to time, at the account holder’s discretion, up to a set credit limit. HELOCs also typically have more flexible repayment schedules than traditional home equity loans and have a variable interest rate. Most consumers think home equity lines of credit are more convenient than traditional home equity loans. While about 40 percent of consumers cited the tax advantages of both types of home equity credit as an important consideration, 43 percent of HELOC users cited convenience of use as an advantage, compared with only 1 percent of those using the traditional home equity loans. [7] Many of the major lenders in Texas make HELOC loans to homeowners in other states. Their experiences underscore how attractive this option is to consumers. Figure 2 presents the percentage of the amount of home equity loans and lines of credit written in Georgia, Florida and California by three major Texas lenders. [8] About 88 percent of the consumers in these states choose HELOCs compared with about 12 percent choosing traditional home equity loans. Potential Economic Impact of HELOCs in Texas One approach to examining what expanded home equity lending might mean in Texas is to estimate what consumers would save if they had access to HELOCs. Three issues are crucial when estimating this impact: what savings could be expected from lower interest costs; how much would HELOCs lower federal income tax bills; and how large total borrowing might become. Underlying this assessment is the assumption that if Texans had access to HELOCs the total home equity usage in Texas would approach the U.S. average. This implies that consumer use of both home equity lines of credit and traditional loans would reach about 14 percent, 7.6 percentage points up from the 2001 level, which was 6.4 and consisted of only traditional home equity loans. The true economic value of HELOCs to consumers lies in low interest rates and as a deduction from federal income taxes. For example, recent data from February 2003 show that the average interest rate on credit card debt is 13.8 percent, the rate for new auto loans is 5.8 percent and on home equity lines of credit, 4.4 percent. [9] This implies that on a $1,000 loan, annual credit card interest charges would be $138 whereas these charges would amount to only $44 for the home equity line of credit. On $1,000 in outstanding credit card debt, conversion of this debt to a HELOC would save $94 in interest payments annually. But even this neglects the fact that HELOC interest costs are deductible from federal income taxes, whereas credit card interest charges are not deductible. Although each individual’s exact marginal tax rate paid depends on adjusted gross income, the National Bureau of Economic Research estimates that, on average, in 1999 interest deductions reduced income taxes 24.5 cents per dollar of interest paid. [10] This implies that, on average, the $44 in HELOC interest payments would generate an estimated $10.78 in federal income tax savings so that the total consumer savings per $1,000 in credit card debt replaced by HELOC would be $104.78 annually. Savings from other loans would be less dramatic. Based on current rates, car loans would cost $58 in interest charges per $1,000 borrowed, or only $14 more than HELOC. But tacking on the deductibility of HELOC raises this savings to $24.78 annually per $1,000 borrowed. The loans likely to be displaced by HELOC would be a mixture of credit card loans and other consumer loans such as car loans. According to Federal Reserve loan data, consumer debt nationwide at the end of 2002 was divided into $738.9 billion in revolving loans, of which credit card debt is a large part, and $1,017.9 billion in non-revolving loans. [11] Assuming Texas consumers have a similar debt profile, about 42 percent of Texas consumer debt would be in revolving credit and 58 percent in non-revolving. Based on these shares, the average consumer would save an estimated $58.38 in interest and tax payments per $1,000 owed by switching from other consumer credit sources to HELOC. [12] How much Texans could save depends on the volume of consumer loans displaced. Using 2001 commercial bank data to update national figures indicates that the traditional home equity loan market in the U.S. reached $352.7 billion, up from $267 billion in 1997. Considering Texas’ share of home equity loans and the average per loan value, Texans account for an estimated 8.4 percent of the U.S. market for traditional home equity loans. Based on this percentage and assuming that Texans would use both traditional and HELOC loans at the national rate, Texas consumers would exchange $12.7 billion in existing loans for HELOC. In doing so, Texas homeowners would save $741 million in interest charges and federal income taxes annually. This would be a modest level of savings. The Federal Reserve Board estimates that households spend about 8 percent of their disposable personal income servicing the debt on revolving loans. [13] The $741 million annual savings from increased use of HELOCs would be about 1.7 percent of the annual amount Texans spend on debt service for revolving loans. [14] Home Equity Delinquencies If Texas consumers relied more on home equity lines of credit and followed national trends, loan delinquencies would likely fall. Based on American Bankers Association data (Table 1), Texas averages fewer loan delinquencies for closed-end home equity loans than consumers at the national level. Loan delinquencies did rise in Texas from 1999 to 2001, but dropped off in 2002. Table 1: Texas Home Equity Delinquency Rates Compared to All Other States Home Equity Delinquency Rates and All States First Mortgage Delinquency Rates* Closed-End** Home Equity Loans(1) Home Equity Lines of Credit(1) All States - First Mortgages(2) Texas All States All States Conventional FHA VA 2002 0.99% 1.30% 0.59% 3.06% 11.55% 7.87% 2001 1.17 1.28 0.73 2.96 10.78 7.67 2000 0.88 1.20 0.75 2.50 9.10 6.80 1999 0.77 1.26 0.62 2.60 8.60 6.80 * Delinquency Rates are based on the number of Loans Past Due 30 Days or More as a Percentage of Loans Outstanding. ** "Closed End" includes home equity and second mortgages (but not home improvement). SOURCES (1)Home equity delinquency rates obtained from "Consumer Credit Delinquency Bulletin" published quarterly by American Bankers Association. (2)First mortgage delinquency rates obtained from "U.S. Census Bureau, Statistical Abstract of the United States, 2001" and Mortgage Bankers Association of America "Quarterly Delinquency Surveys." But nationwide, loan delinquencies for lines of credit are slightly more than half the rates seen for closed end home equity loans. Based on this pattern, a shift towards using home equity lines of credit from traditional home equity loans should lower overall home equity delinquency rates. Compared with first mortgages, the delinquency rates for both home equity loans and lines of credit are substantially lower. Summary The use of home equity loans in Texas has risen dramatically following constitutional changes in Texas in 1997. Use of closed-end traditional home equity loans in Texas exceeds nationwide use. The fact that home equity lines of credit are not available in Texas contributes to a higher reliance on traditional home equity loans. But the strong consumer preference expressed for HELOCs in other states and consumer preference for their ease of use may indicate that continued expansion of lower interest, tax deductible home equity financing by consumers in Texas may slow without access to these loans. If Texans were to use home equity financing only up to the national average through HELOCs, lower interest payments and lower federal taxes would save Texas consumers $741 million. Making HELOCs available to Texas consumers would require passing another constitutional amendment and legislation proposing such amendments will likely be introduced during the current legislative session. If the nature of consumer safeguards and other requirements on lending institutions in Texas making HELOC loans were significantly more restrictive than national practices, interest rates on these loans in Texas could be higher than national rates, and the economic impacts less. Data Collection While banking and finance are two of the most heavily regulated industries, this level of scrutiny does not always result in the availability of detailed information. Since 1987, banks and finance companies have reported home equity lines of credit under receivables on quarterly Call Reports and since 1991 have also separately reported their holdings of traditional closed-end home equity loans. Mutual savings banks also report these data on Federal Reserve Board Call Reports. Other segments of the financial industry report this information to varying degrees. Savings and loan associations and federal saving banks report credit line receivables on Call Reports, but they do not separate home equity loans from first mortgages. Since June 1996, finance companies have reported commercial and residential mortgages separately but do not distinguish between loans under lines of credit and traditional loans. Credit union data is available on both types of home equity debt from the Credit Union National Association. At the national level, some data track the degree to which consumers utilize the various home equity loan alternatives. Every two years the Federal Reserve Board surveys consumers’ use of credit. This data, while instructive on overall trends and the use of home equity loans and lines of credit, does not contain information about practices in particular states. Moreover, much of the state-specific data collected from financial institutions is available primarily for the location of the financial institution involved, and not where the loan was made. Where this data are available, coverage by type of financing (home equity loan versus line of credit) is limited. The Texas-specific data in this analysis is derived largely from two sources. First, the U.S. Bureau of the Census surveys about 60,000 Americans every two years about housing conditions. This survey includes questions about the usage of home equity loans, but only the most recent survey, from 2001, elicits responses on traditional home equity loans separately from home equity lines of credit. Because this survey is national, there is only partial coverage of Texas. Specifically, publicly available data from the survey identifies only responses coming from nine metropolitan areas in Texas. Although the sample does contain responses from non-metropolitan areas, these are not identified by state. The Census survey covers about 68.2 percent of the Texas population. The second source of data is internal surveys of lending activity conducted by lending institutions doing business in Texas. These institutions cover more than 10 percent of the Texas market for commercial financial institutions and financial companies. These data are used to identify the potential to expand home equity lending in Texas if lines of credit became available. Endnotes [1] In 1997 and before, availability of home equity loans in Texas was limited to home improvement loans, loans to pay outstanding taxes and loans allowing one spouse to “buy out” another in the case of divorce. Such loans were typically known as a second lien against the property. Homeowners could not secure a loan backed by the equity in their home and use the proceeds of the loan for purposes other than those specified in law. Outside of Texas, using home equity loan proceeds for whatever purpose and even the more flexible home equity line of credit (a revolving line of credit secured by home equity) have been widely available for years. [2] The tentative nature of this statement stems from what seems to be respondent confusion to the American Housing Survey (AHS). In the 2001 AHS, 14 Texas households identified themselves as having a home equity line of credit in 2001. Since these lines of credit currently cannot be offered in Texas, the most likely explanation for this is that these respondents misunderstood the “line of credit” option in the survey as describing the “draw down” feature of a home improvement loan during construction when, in fact, these instances were almost certainly traditional “closed end” loans. Placing these responses in that category indicates that 6.4 percent of the homeowners in the survey in Texas had a closed-end home equity loan as compared to only 5.7 percent in states outside of Texas. [3] House Joint Resolution 31 (HJR 31) passed by the 1997 Legislature that, upon passage, became effective January 1, 1998. [4] On November 2, 1999, Texas voters approved constitutional amendments proposed by the 1999 Legislature to address these problems, Senate Joint Resolutions 12 and 22 (SJR 12 and 22). [5] Data submitted by lenders in early 2003. For number and amount of loans in Texas, the survey included five large Texas lenders. [6] Glenn B. Canner, Thomas A. Durkin and Charles A. Luckett, “Recent Developments in Home Equity Lending,” Federal Reserve Bulletin, April 1998, p. 243. [7] Canner, Durkin and Luckett, pp. 241- 251. [8] From data submitted by lenders. Together these three lenders serve more than 10 percent of the commercial banking market in Texas. [9] These rates and those of HELOCs are from http://www.bankrate.com/ on February 18, 2003. The credit card rate is for a standard card (not gold or platinum) at a fixed annual rate. The auto loan figure refers to a 48-month loan for a new car. The HELOC rate is for a $10,000 or minimum amount. [10] http://www.nber.org/~taxsim/mrates/mrates2.html , February 20, 2003. [11] Federal Reserve Board Statistical Release, G.19, Consumer Credit, February 7, 2003. http://www.federalreserve.gov/releases/g19/current/ . [12] This is a fairly conservative assessment on two points. First it assumes that consumers would replace current borrowing in proportion to the amount borrowed of each type without consideration of the interest rates charged for each type of borrowing. A more rational approach would be to replace all of the most costly borrowing first. Secondly, new car financing rates are among the lowest cost loans available and this probably underestimates the interest costs of non-revolving loans. [13] http://www.federalreserve.gov/releases/housedebt/default.htm , February 19,2003. [14] Disposable personal income in Texas is estimated to be $535.2 billion in 2001. Carole Keeton Strayhorn Texas Comptroller of Public Accounts Window on State Government Contact Us Privacy and Security Policy

Selling Home

Home Not Selling - Home & Garden - Why is my house not selling? @ FemaleFirst Home & Garden Navigation › Home › Home & Garden Home City Guides › Edinburgh › Leeds › Liverpool › Manchester › Newcastle › Sheffield Moving House › Mortgage › Moving day tips › House Pricing House Products › Cookers › Telephones › Fridges › Freezers › Furniture › Kitchen Products › Television sets › Vacuum cleaners › Washing Mach. Tell A Friend › Tell A Friend Archive › Earlier Stories Why is my home not selling? If your house has been on the market for a number of months, you may well have to consider lowering your asking price. Maybe you over priced, or it may be that the market conditions quickly changed. Be a Female smart mover! Click here to get the mortgage that's best for you. Whatever the reason for the lack of interested buyers, you are faced with three options. Sit it out Buyers tend to get more and more wary of properties that have been on the market for a some time and the longer it stays unsold, the worse this effect is going to become. Sometimes it pays to be patient but if you are in a hurry to sell you should lower the price. Or if you have been trying to sell it on your own it might be time to get the professionals in. Lower the price Most people lower the price of their property if it hasn`t been on the market for a while. If you are going to lower the price, make sure that you do it so that prospective buyers can see the difference, but don`t lower to the point where you are leaving yourself short. Talk to your agent and get their opinion on what price you should lower it too. Take it off the market If you are selling out of choice rather than necessity, it can be worth thinking about taking your home off the market for a few months. Waiting until the broader market conditions can help make sure that you get the price you are looking for, but only if your property is valued correctly in the first place. If you are simply asking more than the property is worth, you are going to have trouble finding a buyer whatever the market conditions. You need to assess why your property is not selling. Is there a fall in the market? are you living in a run down area? is your asking price to high? or is there damage to the house? Talk with your agent and go through the possible reasons for the property not selling. You could try changing your agent or signing up with more than one. Allowing other agents to try and sell the property will broaden the number of potential buyers that are reached with your property details. Chat with other members | Structure | Lingerie | Womens Chat | Advertise | Terms & Conditions | About Us | Contact Us ShoppingFirst.co.uk | MaleFirst.co.uk | CoolBriefs.com | TeenFirst Server: web2.femalefirst.co.uk © 2005 Femalefirst Division of Play-2-Win Ltd all rights reserved

Real Estate Agent

Rental Property 10.1 Capital

Frequently Asked Questions - Keyword: Rental Property Home | Contact IRS | About IRS | Site Map | Español | Help Advanced Search Search Tips IRS Resources Compliance & Enforcement Contact My Local Office e-file Forms and Publications Frequently Asked Questions News Taxpayer Advocacy Where To File Frequently Asked Tax Questions And Answers Keyword: Rental Property 10.1 Capital Gains, Losses/Sale of Home: Property (Basis, Sale of Home, etc.) I lived in a home as my principal residence for the first 2 of the last 5 years. For the last 3 years, the home was a rental property before selling it. Can I still avoid the capital gains tax and, if so, how should I deal with the depreciation I took while it was rented out? If, during the 5-year period ending on the date of sale, you owned the home for at least 2 years and lived in it as your main home for at least 2 years, you can exclude up to the maximum dollar limit. However, you cannot exclude the portion of the gain equal to depreciation allowed or allowable for periods after May 6, 1997. This gain is reported on Form 4797. If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, the amount you cannot exclude is the amount allowed. Refer to Publication 523 , Selling Your Home and Form 4797 (PDF), Sale of Business Property for specifics on calculating and reporting the amount of gain. References: Publication 523 , Selling Your Home Publication 527 , Residential Rental Property Publication 587 , Business Use of Your Home Form 4797 (PDF), Sale of Business Property 11.1 Sale or Trade of Business, Depreciation, Rentals: Depreciation & Recapture Can the entire acquisition cost of a computer that I purchased for my business be deducted as a business expense or do I have to use depreciation? The entire acquisition cost of a computer purchased for business use can be expensed under Code section 179 in the first year if qualified, or depreciated over a 5-year recovery period. Under section 179, you can elect to recover all or part of the cost of certain qualifying property, up to a dollar limit, by deducting it in the year you place the property in service. You can elect to expense the cost of qualifying property instead of recovering the cost by taking depreciation. To claim the expense in the first year, the property must be used more than 50% for business use, and meet the other requirements for expensing. One of those requirements is that the total cost of qualifying property you can deduct after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Any cost not deductible in one year under section 179 because of the business income limit can be carried to the next year. For any taxable year beginning after 2002 and before 2006, a new law raised the aggregate cost that can be expensed under section 179 to $100,000 and also expanded the definition of Code section 179 property to include off-the-shelf computer software. See IRS site for Code Section 179 for the expanded definition. If you make a choice to depreciate the property you can claim in the placed-in service year of the property a special depreciation allowance for eligible property you acquired after September 10, 2001 and before January 1, 2005. The special depreciation is figured before you calculate your regular depreciation. To qualify for the special depreciation the property must: Be property that is depreciated generally under MACRS (Modified Accelerated Cost Recovery System) and that has a recovery period of 20 years or less. Property required to be depreciated under the straight-line method of the alternative depreciation system of MACRS generally is not eligible. Be property that is acquired by you after September 10, 2001 and before January 1, 2005. Be property that is placed in service by you before January 1, 2005. Be property the original use of which began with you after September 10, 2001. This means that the property is new property. For eligible property acquired after September 10, 2001, and before May 6, 2003, the special depreciation deduction is equal to 30% of the property's depreciable basis. For eligible property acquired after May 5, 2003 and before January 1, 2005, the special depreciation deduction is equal to 50% of the property's depreciable basis. If the property is acquired after May 5, 2003, but there was a written binding contract to acquire the property in effect before May 6, 2003, the property is not eligible for the 50% special depreciation. Also, if the property is acquired after May 5, 2003, but the original use of the property began before May 6, 2003, the property is not eligible for the 50% special depreciation. And, if you acquired the property before May 6, 2003, but placed the property in service after May 5, 2003, the property is not eligible for the 50% special depreciation. If the property is eligible for the 50% special depreciation deduction and you claim this 50% depreciation, you cannot claim the 30% special depreciation deduction for the property. However, you can elect to deduct the 30% (instead of 50%) special depreciation for property eligible for the 50% special depreciation deduction. These elections are made for an entire class of property (for example, 5-year property) instead of for each property. If your property is located within the New York Liberty Zone, there are different rules for special depreciation deduction. See Publication 946 , How to Depreciate Property for additional information on the special deduction. References: Publication 946 , How to Depreciate Property Publication 535 , Business Expenses We have incurred substantial repairs to our rental property: new roof, gutters, windows, furnace, and outside paint. What are the IRS rules concerning depreciation? Replacements of roof, rain gutters, windows, and furnace on a residential rental property are capital improvements to the structure because they materially add to the value of your property or substantially prolong its life. The items would be in the same class of property as the rental property to which they are attached. Since the property is residential rental property, the items are generally depreciated over a recovery period of 27.5 years using the straight line method of depreciation and a mid-month convention. Repairs, such as repainting the residential rental property, are currently deductible expenses. A repair keeps your property in good operating condition. It does not materially add to the value of your property or substantially prolong its life. Repainting your property inside or out, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows are examples of repairs. If you make repairs as part of an extensive remodeling or restoration of your property, the whole job is an improvement. In that case, you should capitalize and depreciate the repair costs as the same class of property that you have restored or remodeled as discussed above. For more information, refer to Publication 527 , Residential Rental Property , and Publication 946 , How to Depreciate Property . References: Publication 527 , Residential Rental Property Publication 946 , How to Depreciate Property 11.2 Sale or Trade of Business, Depreciation, Rentals: Rental Expenses v Passive Activity Losses (PALs) I purchased a rental property last year. What closing costs can I deduct? The only deductible closing costs are those for interest, and deductible real estate taxes. Other settlement fees and closing costs for buying the property become additions to your basis in the property. These basis adjustments include: Abstract fees, Charges for installing utility services, Legal fees, Recording fees, Surveys, Transfer taxes, Title insurance, and Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Fees related to obtaining a loan are capital expenses and should be amortized over the life of the loan. For additional information, refer to Publication 527 , Residential Rental Property, Publication 17 , Your Individual Income Tax Guide , and Publication 535 , Business Expenses . References: Publication 527 , Residential Rental Property Publication 17 , Your Individual Income Tax Guide Publication 535 , Business Expenses Can you deduct Private Mortgage Insurance (PMI) premiums on rental property? If so, which line item on Schedule E? Yes. You can deduct Private Mortgage Insurance premium on line 9 of Form 1040, Schedule E (PDF), Supplemental Income and Loss . Write "PMI" on the dotted line. References: Publication 527 , Residential Rental Property Form 1040, Schedule E (PDF), Supplemental Income and Loss Form 1040, Schedule E Instructions , Supplemental Income and Loss 11.3 Sale or Trade of Business, Depreciation, Rentals: Personal Use of Business Property (Condo, Timeshare, etc.) I rent my home out for two weeks each year. Do I have to show the income on my return? You must first consider if you use your dwelling as a home. You are considered to use a dwelling as a home if you use it for personal purposes during the tax year for more than the greater of 14 days or 10% of the total days it is rented to others at a fair rental price. It is possible that you will use more than one dwelling unit as a home during the year. For example, if you live in your main home for 11 months and in your vacation home for 30 days, your home is a dwelling unit and your vacation home is also a dwelling unit, unless you rent your vacation home to others at a fair rental value for more than 300 days during the year. There is a special rule if you use a dwelling as a home and rent it for fewer than 15 days. In this case, do not report any of the rental income and do not deduct any expenses as rental expenses. If you itemize your deduction on Form 1040, Schedule A (PDF), Itemized Deductions , you may be able to deduct mortgage interest, property taxes, and any casualty losses. For additional information, refer to Tax Topic 415 , Renting Vacation Property/Renting to Relatives and Publication 527 , Residential Rental Property (including Rental of Vacation Homes) . References: Form 1040, Schedule A (PDF), Itemized Deductions Tax Topic 415 , Renting Vacation Property/Renting to Relatives Publication 527 , Residential Rental Property (Including Rental of Vacation Homes). I am renting a house to my son and daughter-in-law. Can I claim rental expenses? In general, if you receive income from the rental of a dwelling unit, such as a house, apartment, or duplex, there are certain expenses you may deduct. Besides knowing which expenses may be deductible, it is important to understand potential limitations on the amounts of rental expenses that may be deducted in a tax year. There are several types of limitations that may apply. Passive Activity losses : In general, you can deduct passive activity losses only from passive activity income (a limit on loss deductions). You carry any excess loss forward to the following year or years until used, or until deducted in the year you dispose of your entire interest in the activity in a fully taxable transaction. There are several exceptions that may apply to the passive activity limitations. Refer to Publication 527 , Residential Rental Property and Publication 925 , Passive Activity and At-Risk Rules . At risk rules: The at-risk rules limit your losses from most activities to your amount at risk in the activity. You treat any loss that is disallowed because of the at-risk limits as a deduction from the same activity in the next tax year. If your losses from an at-risk activity are allowed, they are subject to recapture in later years if your amount at risk is reduced below zero. Refer to Publication 925 , Passive Activity and At-Risk Rules. Not for profit activities: If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. Any rental expenses in excess of rental income cannot be carried forward to the next year. Refer to Publication 527 , Residential Rental Property and Publication 535 , Business Expenses . Rental of a dwelling unit: The tax treatment of rental income and expenses for a dwelling unit that you also use for personal purposes (renting to a relative may be considered personal use even if they are paying you rent) depends on whether you use it as a home. Refer to Publication 527 , Residential Rental Property . Expenses in connection with rental of a dwelling unit for less than 15 days per year . Refer to Publication 527 , Residential Rental Property . References: Publication 527 , Residential Rental Property Tax Topic 414 , Rental Income and Expenses Tax Topic 415 , Renting Vacation Property/Renting to Relatives 11.4 Sale or Trade of Business, Depreciation, Rentals: Sales, Trades, Exchanges What form(s) do we need to fill out to report the sale of rental property? The gain or loss on the sale of rental property is reported on Form 4797 (PDF), Sale of Business Property . Form 1040, Schedule D (PDF), Capital Gains and Losses , is often used in conjunction with Form 4797. For further information, refer to Publication 544 , Sales on Other Disposition of Assets, Publication 550 , Investment Income and Expense , the Instructions to Form 4797 (PDF), Sale of Business Property , and the Instructions to Form 1040, Schedule D, Capital Gain and Losses . References: Form 4797 (PDF), Sale of Business Property Form 4797 Instructions Publication 544 , Sales and Other Dispositions of Assets Publication 550 , Investment Income and Expense Form 1040 Schedule D (PDF), Capital Gains and Losses We are selling rental property and have never claimed depreciation. What do we do about this when we file our taxes? When reporting the sale of or computing gain or loss on rental property, you are required to make an adjustment to your basis for allowable depreciation regardless of whether the deduction was taken. For more information refer to Publication 544 , Sales or Other Dispositions of Assets , and the Form 4797 Instructions , Sales of Business Property . You can claim the depreciation not taken for the rental property in the years before the year of sale. How to do this depends on when you placed in service the rental property. If you placed in service the rental property before calendar year 2003, you may amend your income tax returns for the years before the year of the sale by using Form 1040X (PDF), Amended U.S. Individual Income Tax Return , to take the depreciation deductions for the rental property that should have been taken. Or, you may file a Form 3115 (PDF), Application for Change in Accounting Method , to claim the depreciation for the rental property that should have been taken for the years before the year of the sale. The Form 3115 must be timely filed for the same tax year in which you sell the rental property. If you placed in service the rental property after calendar year 2002 and you have unclaimed depreciation for two or more years before the year of sale, you must use Form 3115 (PDF), Application for Change in Accounting Method , to claim the depreciation for the rental property that should have been taken for the years before the year of the sale. The Form 3115 must be timely filed for the same tax year in which you sell the rental property. If you placed in service the rental property after calendar year 2002 and you have unclaimed depreciation for only the year immediately preceding the year of sale, you may amend your income tax return for that prior year by using Form 1040X (PDF), Amended U.S. Individual Income Tax Return , to take the depreciation deduction for the rental property that should have been taken. Or, you may file a Form 3115 (PDF), Application for Change in Accounting Method , to claim the depreciation for the rental property that should have been taken for the prior year. The Form 3115 must be timely filed for the same tax year in which you sell the rental property. References: Publication 544 , Sales or Other Dispositions of Assets Form 1040X (PDF), Amended U.S. Individual Income Tax Return Form 3115 (PDF), Application for Change in Accounting Method Form 3115 Instructions , Application for Accounting Method Form 4797 Instructions , Sales of Business Property Publication 527 , Residential Rental Property (including Vacation Homes) What forms do we file to report a loss on the sale of a rental property? The loss on the sale of rental property is reported on Form 4797 (PDF), (Sale of Business Property) as ordinary loss. References: Form 4797 (PDF), Sale of Business Property Publication 544 , Sales and Other Dispositions of Assets More Frequently Asked Tax Questions Accessibility | FirstGov.gov | Freedom of Information Act | Important Links | IRS Privacy Policy | U.S. Treasury