What small homeowners need to know: tax deductions and more!

Not only does rental income provide additional revenue to a homeowner, it has tax benefits. The rental income that a homeowner receives is not federal taxable income and is thus deducted. Homeowners can also deduct the interest paid on their mortgage.

What small homeowners need to know: tax deductions and more!

By Chereen James

With the influx of new residents, the increasing demand for livable space and the prevalence of real estate development, New York City may seem a daunting place for first-time homebuyers. But, there is no need to fear. With the help of a landlord-tenant attorney, a one and two-family homeowner can navigate landlord-tenant issues, understand the tax benefits of homeownership and even understand how bankruptcy proceedings can help them if they have fallen susceptible to the pressures of homeownership.

Most times, one and two-family homeowners in New York City rent rooms and apartments to earn additional income. Although New York City is known for its tough stance on tenant matters, landlords need to know the law so that their interests will prevail in Court. Know the rules for renting rooms and apartments. Know that tenants can and do get evicted. Know that eviction is done according to specific Court rules, procedures, and that there must be an actual cause for removal.

Any rooms that are rented must be legal, which means that the Certificate of Occupancy, issued by the Department of Buildings, corresponds with the rented rooms. If the space rented is illegal, the landlord may not prevail in court, and may not be able to recover rent. There are two main types of eviction proceedings; non-payment and holdover. Non-payment proceedings allow for landlords to recover unpaid rent. A landlord should know that they should not wait too long to bring the action, as they may not prevail against a laches defense. Non-payment proceedings lead to eviction when the tenant fails to pay stipulated rent and a judgment has been entered against them. Holdover proceedings allow landlords to recover the premises once the lease expires, or if it’s a month-to-month tenancy, once the month has ended.

Not only does rental income provide additional revenue to a homeowner, it has tax benefits. The rental income that a homeowner receives is not federal taxable income and is thus deducted. Homeowners can also deduct the interest paid on their mortgage. Another tax benefit to one and two-family homeowners is the cost of remodeling the home, which adds to its value. If the home is remodeled through refinancing, a deduction can be applied. Another deduction is energy efficient renovations. Upon selling the home, a single homeowner may exclude up to $250,000 in capital gains earned from the sale, while a married couple may exclude up to $500,000.

Homeowners sometimes fall susceptible to the pressures of homeownership and may default on their mortgages and other payments. In that event, a homeowner may file a Chapter 7 or a Chapter 13 bankruptcy. With a Chapter 7 Bankruptcy, a homeowner will be able to discharge the debt owed to creditors and delay foreclosure proceedings. With a Chapter 13 bankruptcy, a homeowner can repay their debt according to a repayment plan specified by the court. This form of Bankruptcy allows the homeowner more time to repay their debt. It also allows the homeowner to keep their homes while paying off creditors and settlements. The balance to creditors that remains after the Chapter 13 bankruptcy can also be erased. A bankruptcy attorney can assist you on the best course of action.

Homeownership may seem daunting, but a knowledgeable homeowner can take the right measures to ensure the success of their investment: increased value of their asset and quiet enjoyment of their home. Knowledgeable homeowners can understand landlord-tenant relationships and the tax benefits it produces. A homeowner may also seek recovery from mortgage defaults and other credit issues through a bankruptcy filing. Finally, a homeowner can consult a landlord-tenant attorney for assistance on these matters, as well as a bankruptcy attorney for guidance in their investments.

Leave a Reply