We bought our house in April 2022 in the Austin Texas area when interest rates were about 4..375%. We bought it at $759,000. There is a similar house on our street with basically the same square footage listed for $590,000. Our current balance on the house is $543,000. We live in a brand new housing track so all the houses are only 2 to 3 years old. We are going to have to move pretty soon for a job in a different city. Our current monthly payment is about $3,900. I checked rentals in the area and they seem to be going for about $3,000 to $3,300 for a house similar to ours. Basically I feel like I only have two choices; 1) Sell it and take a huge loss. 2) Rent it out at a loss and hope interest rates go down and the value goes back up a bit. Are there any other options you would recommend? Is there something I can do to give me a tax advantage?
House worth a lot less than when we bought it. What should we do?
This wouldn't save any money unless the home loses more value after they convert to a rental.
And even then it doesn't save money on their personal taxes, just on rental income
The IRS doesn't have the capacity to know the actual basis and whether or not it was adjusted down enough. Also, the real estate profit and losses pass through to the personal taxes unless it was classified as a separate entity (other than single member LLC). It's not going to be because the loan could be not be reclassified as a separate entity. Thus, the real estate is just a sole proprietorship on the personal taxes.
Planning to commit tax fraud is a bad idea, if you get audited you will need to prove the basis
Also, the real estate profit and losses pass through to the personal taxes
This is incorrect, it only applies to passive income
incorrect. the gain or sale of any assets, included directly RE, are on personal taxes (unless that real estate is a separate entity that files its own taxes). So, that capital loss would be able to offset capital gains in stocks or other assets.