Should i refinance my paidoff house if im going to rent it?

Estela
I have a paid for house. I would like to rent it out and live in a rental property elsewhere for the time being. I'm wondering if owning my house outright will be a drawback since I cannot deduct my housing cost as a renter and I will have to count 100% of my rental income as "profit" (is this correct?). Net-net, it seems that my housing cost remains the same but that my tax liability could sky-rocket from this situation. If I refinance a large portion of the house, can I then deduct the interest cost as a business expense to substantially lower my tax liability? Is there any advantage to having a paid for rental property that I'm not thinking of?

Indira
No one knows what tax restructuring will take place under Obama, so I wouldn't take anything for granted just yet. He will only be in office four years (hopefully) and you'll be stuck with a mortgage payment on your refinanced house for longer than that. In the meantime though, he is promising to raise taxes and cut taxes, but he's already gone back on so many of his campaign promises that no one really can say what he's going to do. My advice is to just sit tight with it ... at least for another year or so until we get more info on the tax situation.

Antione
So you're looking at adding approx 10, 000 to your yearly income since the rental will profit apprx 800 a month for you. Let's say you're in the 20% tax bracket and it will cost you 2000 in taxes leaving you with 8000 in your pocket. Why would you want to pay a monthly mortgage and interest to offfset 2000 in taxes that will cost you less than 200 a month, much less than a mortgage payment.

Roscoe
ride it out don't take any chances . as for renting your problem's are only the beginning. wait

Agatha
You're not looking at the whole picture.While your tax liability will rise with no mortgage interest deduction against the rent, your total cash flow will take a MAJOR beating since you will be paying all of that interest. For example if you are paying $6, 000 per year in mortgage interest and are in a 25% tax bracket, your tax savings will be $1, 500 but you'll still be out the other $4, 500 in interest costs.If you have a need for the money, fair enough. But do NOT fall into the common trap of only looking at the tax angle. It might make sense to take out the loan if you can get more investing it elsewhere than the mortgage interest cost but consider the WHOLE picture before you commit to anything.