Tax Help: Business Property Vs Rental Property
I have 2 condos which I rent through local rental management companies. The management company send me a 1099 at end of the year. My invlovement in managing the property is very limited. If I claim to be a passive investor, I can not depreciate these properties as well as can not take losses (which is significant in this year). If I claim to be running a business where I own 2 properties, I can do depriciate as well as deduct the losses against my AGI. Are there pros/cons in using my properties as part of a business (rather than rental real estate)? Will this have any impact on the taxes when I will try to sell these properties? I am not sure what advantages there are to claim the condos as rental properties.
You need to read IRS Publication 527 available at www.irs.gov This will assist you with what the proper treatment is based on your facts. Your facts will dictate how you treat the rentals as opposed to the way you want to treat them.