Mr. AtlantaTaxExpert;

I love the way you answer people's questions, perhaps you can help me too.

I own a house (first residence in NYC) and always lived there since it was bought. I now live in NJ with my boyfriend, and rent the NYC house to my sister. I haven't changed my address anywhere yet, but I want to.
I've always filed my taxes as my residential home in NYC.

How will not living in the NYC house and renting it now affect my taxes when I file in 2009?

Thank you.

ebaines

I'm sure AtlantaTaxExpert will answer your question shortly, but let me give it a shot:

You should consider yourself a NJ resident, as of the date you moved across the river from NYC. This will save you some $$, as NJ has lower income tax rates than NY, and you also avoid the NY City resident income tax. The NYC house is now a rental property, so you are now a landlord and will have to include the income (after expenses) in your tax filings. Since the rental home is in NY, you will have to file NY state income tax and report your rental income to them. When you file your NJ state tax, you will report this income as well to them, but then NJ lets you deduct the amount of taxes paid to NY so that you aren't double-taxed on it. Hope this helps!

valv0715

Ebaines; thank you for answering!. I'm all for saving some $$

From the sound of it, I will have to have an accountant do my taxes. I've always done them myself, but it's sounds a bit complicated.

Thanks for the advice!.

AtlantaTaxExpert

Valv0715:

Sorry for the delay in answering; I was on vacation.

Ebaines advice is solid. You will need to file Schedule E to report the rental income and expenses. Make sure you treat your sister like you would a normal tenant, to include having a signed lease. The IRS takes special interest in rental relationships between family members, so you want to be sure everything is proper.

Using an experienced tax professional to do your return IS the best course of action, because the rental property adds a level of complexity to the return that most lay persons cannot properly handle.