Inherited a house now renting - tax implications?

[franknmaggie]

California

Inherited my parents house. Now renting it to my son...what is the tax rate on the rental income?

 

[tranquility]

The rate is ordinary income, but the income is passive.

You are taxed only on the net. The gross minus ordinary and necessary expenses minus depreciation. (On the stepped-up or carried over basis.) You can take the loss up to $25K in most instances against non-passive income.

 

[FarmerJ]

So you know , if you do not depreciate the property during its time as rental then if there is a negative tax consequence when you sell the negative consequence is removed.

 

[tranquility]

Depreciation is not an option. The code reads taken or should have been taken. How things would be treated change as to if you didn't actually take it (it gets complex) but, you have to take depreciation on business property like a rental.