Natalie owns a condominium near Cocoa Beach in Florida. This year, she incurs th

Question

Natalie owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her condo:

Insurance $1,000

Advertising expense 500

Mortgage interest 3,400

Property taxes 1,500

Repairs & maintenance 650

Utilities 950

Depreciation 8,500

During the year, Natalie rented out the condo for 75 days, receiving $10,000 of gross income. She personally used the condo for 35 days during her vacation. Assume Natalie uses the IRS method of allocating expenses to rental use of the property. What is the total amount of for AGI (rental) deductions Natalie may deduct in the current year related to the condo?

Explanation / Answer

Particulars Amount($) Gross Rental Income $10,000 Tier 1 expenses: Advertising expense $500 Mortgage interest 3,400x75/110 $2,319 Property taxes 1,500x75/110 $1,023 Less: Total Tier 1 expenses $3,842 Balance $6,158 Tier 2 expenses: Insurance $1,000x75/110 $682 Repairs & maintenance 650x75/110 $443 Utilities 950x75/110 $648 Less: Total Tier 2 expenses $1773 Balance $4,385 Tier 3 expenses: Depreciation 8,500x75/110=$5,795 but the deduction is limited to the remaining income $4,385 Balance $0 Total "For AGI" deductions ($3,842 + $1773 + $4,385) $10,000

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