Renting out your old home: the rental set up right from the first year
Free tax review
Find out what we’d handle and what it costs
Thirty minutes by phone; you leave with one written price.
We handle the rental’s tax side from the year it starts: the depreciation, what goes on the return, whether a loss helps, and where a later sale stands. The first review is free, any planning is one flat fee quoted in writing before work starts, and a return with one rental starts at $650. Based in Santa Clarita, we work with homeowners renting out their old home in any state.
Typical situations
Do you work with people renting out their old home?
Yes, we take on homes that became long-term rentals in any state: a house kept after a job move, a condo rented out after a move in with a partner, a home rented to a relative, a first rental year with a property manager, a rental that may be sold while the home-sale exclusion still applies, and a rental left off last year’s return.
A couple who moved for a job and kept the house
We work from the purchase closing statement, the improvement receipts, and something showing what the house was worth the month it went up for rent — an appraisal, or sales of similar homes nearby that month. Without a record of that value and that month, the depreciation schedule (the yearly write-off for the cost of the house, never the land) starts from a guess. We fix the date the house was ready and available for rent, document its value then and the land share, and set the schedule from them. A return with one rental from $650: how we prepare the return. The move has its own tax side: the tax side of moving to another state.
A homeowner who moved in with a partner and rents out the condo
The documents are the mortgage interest statement — Form 1098, the lender’s yearly statement of the interest paid — the property tax and insurance bills, the move-out date and the date the condo was first offered for rent. Putting the whole year’s mortgage interest and property tax on the rental overstates the rental deductions: in the year of the move the bills are split by date, and only the rental months go on Schedule E (the part of the personal return where a rental goes). We split the year at the date the condo was offered for rent, straight from the statements. We also check that it was rented or offered for rent for at least 12 months in a row, so the months lived there don’t count as personal-use days.
An owner renting the old home to a relative below market rent
We work from the lease or the rent record, and rents for similar homes nearby. The below-market rent can limit the rental deductions: below a fair rental price (what an unrelated person would pay for a similar home nearby), each day the relative lives there counts as the owner’s personal use. We count the personal-use days and check the rent against similar rentals nearby; we don’t set the rent.
A first-year landlord whose property manager collects the rent
The paperwork is the manager’s year-end statement, the Form 1099-MISC (the form a property manager sends reporting the rent it paid over), the management fee and the repair invoices. Without the manager’s statement, the fees and repairs paid out of the rent are easy to leave off the return. For rent paid in 2026, the manager files that form once the rent paid over reaches $2,000, and all the rent is reportable with or without one. We match the 1099-MISC to the year-end statement, enter the fees and repairs as expenses, and set up the depreciation on Form 4562 (the depreciation form filed the first year). A return with one rental from $650.
An owner thinking of selling while the exclusion may still apply
We start from the move-in and move-out dates, the purchase closing statement and the depreciation schedule from the rental years. Without the move-out date pinned down, the date that still qualifies is a guess. We tell you whether a sale can still meet the test of owning the home and living in it as a main home for 2 of the last 5 years and, if it can, the last closing date that does, plus the depreciation from the rental years, which is taxed even if the rest of the gain is excluded. When a sale gets close, the next step is planning the sale itself.
A homeowner who left the rental off last year’s return
We start from last year’s return, that year’s rent records and expense receipts, and the closing statement from the purchase. The unreported rent is still income for that year, and that year’s depreciation reduces what the house counts as having cost at a sale, whether or not it was claimed. We read the prior return and say what needs fixing before the current year is filed. The fix is priced inside the quote.
Renting the home in short stays instead? Different rules apply — see short-term rentals such as Airbnb stays.
Depreciation
How is depreciation figured when I rent out my old home?
When you turn your home into a rental, depreciation is figured from the lower of two numbers on the day it becomes a rental, with the land taken out of both: what the home is worth that day, or your adjusted basis (what you paid plus permanent improvements, minus certain decreases). The house is depreciated straight line, the same amount each full year, over 27.5 years, starting the month it is ready and available for rent, not the month the first tenant moves in.
When the purchase papers don’t split land from house, we use the assessor’s land and improvement values, and we keep the appraisal or nearby sales behind the value we used.
Rental losses
Can I deduct a rental loss against my salary?
A rental loss generally can’t offset your salary — it’s a passive loss. If you actively participate (approving tenants, setting the rent and terms, approving repairs and other spending), up to $25,000 of the loss a year can offset your salary. That allowance shrinks once modified adjusted gross income (your adjusted gross income with certain items added back) passes $100,000 and is generally gone at $150,000.
We look at who approves tenants, rent and spending — including when a property manager handles the day-to-day — and figure your modified adjusted gross income against that range. A loss that can’t be used carries forward to later years, and it is released in full when the whole property is sold to an unrelated buyer in a fully taxable sale.
What you get
What do I get from the rental planning review?
Our rental planning review gives you the rental’s numbers in writing: the setup figures with the first return, each year’s figures with that year’s return, and the dates that matter if a sale is coming.
The conversion year
The date it became a rental, its value and basis that day, the land split and the 27.5-year schedule — with the records behind each number: the closing statement, the appraisal or nearby sales, and the assessor’s land value.
Each year’s Schedule E figures
The rent, each expense, repairs sorted from improvements, and the depreciation — the actual numbers, in order, with the reasoning written next to them.
Whether the loss is usable
Who approves tenants, rent and repairs, your modified adjusted gross income for the year, and the amount carried forward — written out with the reasoning.
If a sale is coming
Your move-in, move-out and rental dates lined up against the 2-of-5-years test, and the depreciation figure that is taxed at the sale.
We prepare the return each year, or hand the figures to your own preparer. If planning isn’t worth paying for, we tell you on the call and you’re done.
What we check
What do you check before anything is filed?
Before anything is filed, we read the purchase closing statement, the improvement invoices and permits, an appraisal or nearby sales from the month it became a rental, the lease and the rent ledger, the property manager’s year-end statement and any Form 1099-MISC, the mortgage interest statement (Form 1098), the property tax and insurance bills, and the prior returns.
- The conversion date checked against the listing paperwork and the lease
- The home’s value that month checked against the appraisal or nearby sales
- The land share checked against the purchase papers or the assessor’s values
- Each invoice checked as a repair or an improvement
- The 1099-MISC checked against the manager’s year-end statement
- Personal-use days checked against the lease and the rent ledger
- Prior depreciation checked against the prior returns
California
What’s different in California when I rent out my old home?
California starts from your federal rental figures; what differs is depreciation (California doesn’t follow federal bonus depreciation), the California passive-loss figure kept on its own form, California tax on the rent when the owner has moved away, and, inside the City of Los Angeles, yearly rental registration.
- The California return changes the federal figures only where state law differs. Depreciation is the usual one: when bonus depreciation (an extra first-year write-off federal law allows on some property) is taken federally on rental items, we keep a separate California depreciation schedule.
- Every rental is passive in California, and its passive-loss rules are generally the same as federal, so the active-participation allowance applies on the California return too; we figure the California passive loss on its own form (FTB 3801, the state’s passive-loss form).
- If you move out of California and rent out your California home, the rent is California-source income: California taxes it even though you now live elsewhere, and once your income passes the filing thresholds you file a California nonresident return (Form 540NR) for it; a later sale of that home is California-source too. We prepare that return, and another state’s return is priced into the quote.
- If the home is inside the City of Los Angeles, the City requires every residential rental unit to be registered each year with its Housing Department before rent can legally be collected, and the City’s business tax registration applies once you rent four or more residential units in the City, not to an owner renting three or fewer. We flag both on the first call; we don’t file them.
Pricing
What do rental tax planning and the return cost in 2026?
The first review is $0 and the planning review after it is a flat fee quoted in writing before work starts; individual returns start at $350, a return with one rental at $650, and business returns at $850 with the owner’s personal return included. Each return is quoted the same way, before we start.
What moves a quote: how many rentals, whether a property manager runs it, whether the purchase and improvement records still exist, a prior year with the rental left off or the depreciation skipped, a sale coming, and a second state — a landlord who moved away. Setting the depreciation up from scratch, rebuilding the purchase and improvement figures when the records are gone, and a prior-year fix are priced inside the written quote.
Planning review
$0 first review
- Planning after it, only if it’s worth paying for
Return with one rental
from $650
- One rental’s Schedule E with its income and expenses sorted
- Repairs vs. improvements and the depreciation schedule on a rental
- Federal and state returns e-filed together
Individual return
from $350
- Federal and state returns e-filed together, one price
- A return with a rental is the $650 tier
The quote is the price.
How it works
What happens after the free call?
During the free 30-minute call, the engagement letter goes out with the price in it; signing it sets up a short onboarding call and the secure-portal invite, then you upload the records, we do the planning review, and you see the return before it’s filed.
The free call
Thirty minutes, six to eight questions: when you moved out and started renting, when you bought the home and what you paid, the improvements since, the rent and the expenses, whether a property manager runs it, whether you plan to sell, and whether you own other rentals. It ends with one flat price for the work we’d take on, in writing before anything starts.
The engagement letter
It goes out during the call with the price in it; sign it when you’re ready. Signing sets up a short onboarding call, and the secure-portal invite comes from that call.
The documents
Through the secure portal: the purchase closing statement, the improvement records, and the year’s rent and expense records — or the property manager’s year-end statement. We send a short checklist so nothing is missed.
The planning review
We set the value and land split on the date it went up for rent, build the 27.5-year schedule, check whether the loss is usable, and send those figures in writing with the reasoning next to them.
The return
Half the return fee starts the work, and the balance is due before e-file. You see the return before it’s filed — nothing goes out until you’ve signed off.
Communication
You’ll know where the rental setup and each return stand.
The person who answers the phone is on the same team that runs your review and prepares your return.
The same-day rule
Call or email during business hours and you’ll hear back the same day — all twelve months.
First year, or depreciation never started
Renting the old home for the first time, or a later year where depreciation was never started — have the closing statement and the manager’s year-end statement in front of you on the call and we’ll tell you what the setup involves.
Admitted to practice before the IRS
Our team of IRS representation specialists is admitted to practice before the IRS. If an IRS letter shows up about the rental, forward it: how we handle IRS letters.
The N&T Tax & Advisory Group team
For a homeowner renting out their old home, we start from the closing statement and, each January, the property manager’s year-end statement and Form 1099-MISC, and prepare the return from them.
Tax planning · Tax preparation · IRS representation · Direct line: (661) 554-4495
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"Alex helped me resolve a complicated tax situation that had been causing me a lot of stress. He was extremely knowledgeable, responsive, and efficient throughout the entire process."
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"Working with Alex was straightforward. I hadn't looked at my books all year, but he made my life easy and handled the whole profit and loss at the end of the year so I could get my taxes done."
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Where we work
Do you work with homeowners renting out their old home outside California?
Yes — we work remotely in any state. Documents come through the secure portal, and we walk through the numbers by phone and screen share. If you live in another state, we prepare that state’s return too and price it into your quote.
What we don’t do
We do the tax work: the planning review when the home becomes a rental, the return each year after it, and IRS letters. We don’t find or screen tenants, choose a property manager, collect rent or price it; we don’t advise on leases, evictions, rent control or security-deposit rules; we don’t handle 1031 exchanges, property tax or reassessment questions, or insurance; we don’t file City of Los Angeles rental registrations; and we don’t give investment, financial or legal advice — we tell you when a question needs an attorney.
Worth reading
What can I read before the call?
These three posts cover the filing calendar for the first return with the rental, how long the records behind it are kept, and what your old state checks after a move.
When Can I Start Filing Taxes in 2027? Opening Day, Refunds, and Deadlines
When the first return with the rental can be filed.
RecordsWhat Receipts to Keep for Taxes in 2026: The Self-Employed Owner’s Keep-or-Toss Guide
Which purchase, improvement and rent records to keep, and for how long.
ResidencyFlorida Residency Requirements for Taxes: What Florida Asks and What Your Old State Checks
If you moved to Florida and kept your old home.
FAQ
Rental tax questions
Do I owe tax on the rent from my old home?
Yes — the rent is income you report on Schedule E, and the tax is on what’s left after the rental’s expenses and depreciation. Advance rent counts the year you get it, and a security deposit you plan to return isn’t income unless you keep it. We total the year’s rent and subtract what the records support.
Can I deduct the mortgage interest and repairs on my rental?
Yes — mortgage interest, property tax, insurance, repairs, management fees and the property manager’s commission are deducted against the rent from the time the home is available for rent. Improvements such as a whole new heating and air system aren’t deducted the year you pay them; they’re depreciated over time. We sort each repair and improvement invoice into this year’s expenses or the depreciation schedule.
Can I still use the home-sale exclusion if I sell the house later?
Yes, if at the closing you still meet the test of owning the home and living in it as your main home for at least 24 months of the 5 years before the sale; rental time after you moved out for good doesn’t count against you. Once 24 months of living there no longer fit inside the 5 years before the sale, that test isn’t met for that sale. The depreciation from the rental years is taxed at the sale either way. We work out how long you have.
Do I need an LLC for my rental?
Not for the tax return — a rental you own in your own name goes on Schedule E of your personal return. Whether an LLC makes sense for liability is a question for your attorney. If you’re weighing one, we walk through how an LLC or another entity would change your return before you form it.
Is renting to a family member treated differently?
Yes, when the relative pays less than a fair rental price or doesn’t live there as their main home. A fair rental price is what a stranger would pay to rent a similar home in the same area; a family member who rents the home as their main home at that price is treated like any tenant, and below it the days the relative lives there count as your own personal use. When personal use passes 14 days, or a share of the days rented at a fair price if that’s more, the rental deductions are limited. We run that day count and the rent comparison for you.
What happens if I move back into the house?
Depreciation stops once it’s your home again. When you later sell, the time it was rented after 2008 before you moved back in reduces how much of the gain the exclusion covers, and the depreciation from the rental years is taxed either way. We count the days before you decide.
Want the rental’s taxes handled from the first year?
One free 30-minute call. You’ll leave knowing what we’d handle and what it costs — whether or not you hire us.
Rather talk now? Call (661) 554-4495 — reach us during business hours and you’ll hear back the same day.
Our team of IRS representation specialists is admitted to practice before the IRS. This page is general information, not tax advice for your specific situation.