May owns a four-plex in Garden Grove, CA. She rents out 3 units and lives in the fourth. Her income and expenses for the entire four-plex are as follows: mortgage interest $8,200, property taxes $9,000, insurance $3,000, utilities $2,000, repairs and maintenance $1,000, depreciation on the entire complex of $5,000, and rental income of $25,000. What amount of net rental income or loss should May report on her current tax return?

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Business

Alana Richards

10 April, 19:47

May owns a four-plex in Garden Grove, CA. She rents out 3 units and lives in the fourth. Her income and expenses for the entire four-plex are as follows: mortgage interest $8,200, property taxes $9,000, insurance $3,000, utilities $2,000, repairs and maintenance $1,000, depreciation on the entire complex of $5,000, and rental income of $25,000. What amount of net rental income or loss should May report on her current tax return?

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Answers (1)

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Jessica Curtis · Answer 1

net income of $3,850

Explanation:

May's income = $25,000

May can deduct 75% of her total expenses since she uses one apartment and rents the other 3.

Total expenses = $8,200 + $9,000 + $3,000 + $2,000 + $1,000 + $5,000 = $28,200

May's deductions = $28,200 x 75% = $21,150

May's net income = $25,000 - $21,150 = $3,850