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Rental income at a loss

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limpyL

Member
What is the name of your state (only U.S. law)? PA

I have 1 rental property I've had for 10 years or so. Over the past 12 months I have had a loss of $11k (house was sitting on the market for 4 months as well as 1900 in damages when the old tenants moved out and the fridge, stove and dishwasher went out feb-apr). Average rent is 2500 but i was only able to get 2400 mortgage is 2600 per month. i have a loss of $400-$500 a month if no repairs are needed (i pay for lawn services but only 7-8 months out of the year), as well as a management company. I had to relocate so i am no longer able to watch over the house.

The current split is 65% me 35% her. When the current % was done we both made mention of the rental income as well as the mortgage payment showing a loss. My losses were never deducted from my gross income. i have gone over chapter 1910 and have not found anything regarding a loss. I have gone over PA child support guild lines and have found nothing. . Im looking for a PA law or code.

I found this "Most states have also adopted a special definition of income for the parent who has control over his or her income stream. Income from self-employment, rent, royalties, proprietorship of a business, or joint ownership of a partnership or closely held corporation includes gross receipts minus ordinary and necessary expenses required to produce such income." this seems to support my stance but does not reference a code or law

Thanks
 
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adjusterjack

Senior Member
When the current % was done we both made mention of the rental income as well as the mortgage payment showing a loss.
Made mention to who?

My losses were never deducted from my gross income
My guess is that you never properly submitted them or computed them.

Did you fill out a worksheet showing those deductions?

i have gone over chapter 1910 and have not found anything regarding a loss. I have gone over PA child support guild lines and have found nothing.
The PA law is 1910.16-2:

http://www.pacode.com/secure/data/231/chapter1910/s1910.16-2.html

See item (a)(2) net income from business or dealings in property.

Do you file a Schedule E on your taxes:

https://www.irs.gov/pub/irs-pdf/f1040se.pdf

You take the loss amount from Line 26, add back any depreciation from line 18, and divide that total by 12 to get the monthly loss.

Why wasn't something like that done?

Did you do this on your own without a lawyer?

Might be time to file for a modification if the difference in CS would be significant.
 

limpyL

Member
Thank you for the laws and links!!! one of the best responses I have had here. TY!!!!

Made mention to who?department of human services (HS).

Did you fill out a worksheet showing those deductions? I did, I printed up everything they asked for. Once we sat down they asked us for proof of all income. we both gave them to HS, they asked us if both parties agreed on the numbers we said yes. She asked about the rental income and asked if it was at a loss and we both replied "yes". Once i got the paperwork in the mail a few days later I noticed it was not on there. i emailed the lady inquiring about adding it to the paperwork.(wife said she wants to appeal to ruling and head to court) I'm worried if the court would think i was hiding something from her to lower my %.



The PA law is 1910.16-2:

See item (a)(2) net income from business or dealings in property. Yes I did. it says net income.. can you have a net income at a loss?? if so that may be where i am confused. Or i was looking for more specific wording maybe?.?.?.

Do you file a Schedule E on your taxes: Yes we did

You take the loss amount from Line 26(-7766), add back any depreciation from line 18(15635), and divide that total by 12 to get the monthly loss(655). 2 things I just noticed with this

1. 1850 (repairs tenant moved out) was left off our taxes for deductions.
2. repairs made after taxes were filed? can i claim those? approximently $2500-$3000. i also have to replace the front and rear doors that is estimated at 3-3.5k(rust ate through the front door and rust is working its way on the back door.(should I have this completed prior ASAP to have it deducted? This was put on hold because Lowes had a manufacture issue and was canceled by lowes.

Why wasn't something like that done? they were done.

Did you do this on your own without a lawyer? Yes i did. I had nothing to hide since she was the one that paid the bills for 8 years. Im not looking to F her over I am 100% ok with the letter of the law. I just want to ensure everything is accurate.

Might be time to file for a modification if the difference in CS would be significant. should I file for a mod

i hope i addressed your questions fully.
 

adjusterjack

Senior Member
Made mention to who? department of human services (HS).
Why DHS?

Did you fill out a worksheet showing those deductions? I did, I printed up everything they asked for. Once we sat down they asked us for proof of all income. we both gave them to HS, they asked us if both parties agreed on the numbers we said yes. She asked about the rental income and asked if it was at a loss and we both replied "yes".
Apparently just saying it wasn't enough.

Once i got the paperwork in the mail a few days later I noticed it was not on there. i emailed the lady inquiring about adding it to the paperwork.
What was the response?

(wife said she wants to appeal to ruling and head to court) I'm worried if the court would think i was hiding something from her to lower my %.
Can't imagine why. You are incurring legitimate expenses. (I know. I used to own rentals.)

See item (a)(2) net income from business or dealings in property. Yes I did. it says net income.. can you have a net income at a loss?? if so that may be where i am confused. Or i was looking for more specific wording maybe?.?.?.
Yes. Net income can be a positive or negative number. Or the difference between gross income and net income can include a loss.

Look at the following loan application to see how it works. Go to Section V. Monthly income and look at the left hand column Gross Monthly Income. All of the figures except net rental income are positive numbers. Net rental income can be either a positive or negative number.

https://www.fanniemae.com/content/guide_form/1003irev.pdf

That's how your monthly income should have been shown on the worksheet.

1. 1850 (repairs tenant moved out) was left off our taxes for deductions.
If those repairs were done in 2016 you'll have to file an amended return. If they were done in 2017 they'll be on your 2017 return.

2. repairs made after taxes were filed? can i claim those?
For the child support adjustment?

Yes. Though I imagine that the court will want all your receipts for the work and will attempt to figure out a monthly average.

i also have to replace the front and rear doors that is estimated at 3-3.5k(rust ate through the front door and rust is working its way on the back door.(should I have this completed prior ASAP to have it deducted?
Yes. If you want to have those expenses averaged in you will need receipts to document them.

should I file for a mod
That's up to you once you figure it all up and see how much of a difference is. You'll also have to find out what your state's threshold is. Some require a 20% difference before you'd be allowed to file for a mod.
 

CTU

Meddlesome Priestess
Why DHS?



Apparently just saying it wasn't enough.



What was the response?



Can't imagine why. You are incurring legitimate expenses. (I know. I used to own rentals.)



Yes. Net income can be a positive or negative number. Or the difference between gross income and net income can include a loss.

Look at the following loan application to see how it works. Go to Section V. Monthly income and look at the left hand column Gross Monthly Income. All of the figures except net rental income are positive numbers. Net rental income can be either a positive or negative number.

https://www.fanniemae.com/content/guide_form/1003irev.pdf

That's how your monthly income should have been shown on the worksheet.



If those repairs were done in 2016 you'll have to file an amended return. If they were done in 2017 they'll be on your 2017 return.



For the child support adjustment?

Yes. Though I imagine that the court will want all your receipts for the work and will attempt to figure out a monthly average.



Yes. If you want to have those expenses averaged in you will need receipts to document them.



That's up to you once you figure it all up and see how much of a difference is. You'll also have to find out what your state's threshold is. Some require a 20% difference before you'd be allowed to file for a mod.

Pardon me for butting in but Jack, this is really, really helpful - thank you! Awesome post.
 

NIV

Member
I'm not going to answer about the things I don't know, only the taxation of the rental.
Do you file a Schedule E on your taxes: Yes we did

You take the loss amount from Line 26(-7766), add back any depreciation from line 18(15635), and divide that total by 12 to get the monthly loss(655). 2 things I just noticed with this

1. 1850 (repairs tenant moved out) was left off our taxes for deductions.
2. repairs made after taxes were filed? can i claim those? approximently $2500-$3000. i also have to replace the front and rear doors that is estimated at 3-3.5k(rust ate through the front door and rust is working its way on the back door.(should I have this completed prior ASAP to have it deducted? This was put on hold because Lowes had a manufacture issue and was canceled by lowes.
The law recently changed on the determination between an expense and a capital investment on rental properties. Strictly speaking, even if you made the "de minimus" election, are you sure the purported "repairs" should be expensed rather than capitalized? Were they included on your depreciation schedule?

Remember that any rental real estate loss is likely to be passive. If your income is high enough, none of the loss would be reported on the 1040 and would be suspended until you had gains or sold the property.
 

limpyL

Member
Sorry for the late reply.. daughters birthday was out all day with her. Great info!!!


NIV.. To be really honest I'm going to have to google many of those words to give you a solid answer.. sorry for the limited vocabulary. LOL


Why DHS? court fees were 300+ i think.. i may be wrong.. DHS was $15. easier maybe??? basically I have no clue why i went through them...


Apparently just saying it wasn't enough. I didn't know if it was added or not at that time. I just went with what they said and assumed it was added. Once I saw it not listed I instantly contacted them via email and voicemail. I hope i did my due diligence.


https://www.fanniemae.com/content/gu...m/1003irev.pdf.. My worksheet was way more detailed than that. I had everything there.. They did not ask us for anything. The only asked us what we made for the most part. As for the rental they asked if i made money on it we both said no. that was it.. (ignorance to the process is my only excuse)

If those repairs were done in 2016 you'll have to file an amended return. If they were done in 2017 they'll be on your 2017 return. it was in 2016, i texted her telling her that we missed deductions and went either unnoticed or ignored. Not sure what one it was. knowing I can deduct that helps.


As for receipts I have everything. If I was unable to locate them I did not include them. Most of my large purchases were done through lowes so they are kept online. or through my management company.
 

limpyL

Member
Slightly off topic--
**kids stay with me and she has them on the weekends
**per our separation agreement during the summer time she picks the kids up every Thursday night returning them Sunday night
**She moved 25 miles away 4 months ago


What is the difference between shared custody and custodial custody??

She is pushing hard for shared custody.. Looking online i don't get the push for it?? What am i missing??

To give an idea of what I'm working with.. this weekend is fathers day. She's not letting me have them.. mothers day weekend was my weekend but i was giving the kids to here. she came 20 mins earlier than she told me the night before she called the cops on me. I told them it was my weekend and they told her sorry they could not do anything.

Because of things like this I know she has a good reason for shared custody I just don't know why. she is really smart so there is a reason (if there is no difference the only thing i can think of is so she feels like she did not leave the kids. that makes complete sense to me)

She also said she wants the kids 3 weekends a month and every other holiday. I'm cool with the holidays but 3 weekends a month Im not ok with. If that would happen I would feel more like a daycare than a father.. (more as in how she would view me) Would any judge agree to something like that?
 
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adjusterjack

Senior Member
Your situation is complicated by the custody and support issues to the extent that you should probably have an attorney.
 

HRZ

Senior Member
I do NOT know the PA support issues ..but the PA definition of income at 23 Pa CSA 4302 uses income not net income and for some purposes I know PA does not factor in a net loss but instead enters a 0

Agree with adjusterjack ...use counsel

There may be a big $ rat in woodpile to go to shared custody

I do know that downstream shared (50/50 ) custody order opens up option to shop for choice of public school district .
 

limpyL

Member
I do know that downstream shared (50/50 ) custody order opens up option to shop for choice of public school district .

That is what I thought but was not 100% sure.


Sorry for the long delay... life gets busy for me at times.

By far the best thread I have ever had here. great info!!

Counsel is coming.. what I have found is they are only as good as the info I can provide.. i have to get them everything to build a strong case.
 

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