Will leasing my barn change my home to an income property?

[Cooper@1960]

I am in Ohio.
I own my home and property free and clear. I no longer have horses so the barn and pastures are mostly unused. If I start leasing out the barn and pastures to a horse trainer will that change my home into an income property? Also would it change my current property tax status as well as causing me to lose my one time tax exempt primary home sale benefit if I sell in the future?

 

[FlyingRon]

It will change the portion that you are leasing to non-residential use. You're allowed to deduct expenses apportioned to the business parts and must depreciate on the same. There's information in IRS pub 587. Can't vouch for Ohio property taxes.

Your capital gains exclusion for the primary residence also is affected. Any non-residential uses within the previous five years from the sale need to be accounted for and can reduce the exclusion. See IRS pub 523.

 

[LdiJ]

I am in Ohio.
I own my home and property free and clear. I no longer have horses so the barn and pastures are mostly unused. If I start leasing out the barn and pastures to a horse trainer will that change my home into an income property? Also would it change my current property tax status as well as causing me to lose my one time tax exempt primary home sale benefit if I sell in the future?

On a federal level the previous law that said you could have a one time sale of your primary home without having capital gains taxes has been gone for many years. The way the law works now, is that you have a $250,000 capital gains exemption ($500,000 married filing jointly) if the home has been your primary residence for at least two of the last 5 years. If you convert part of your property to income property (ie rent part of it out or rent it out for a few years) then you must pro-rate the gains between income property and primary residence to determine how much capital gain you might have for tax purposes.

 

[adjusterjack]

You're also going to have an insurance issue. You'll want to make sure that the horse trainer has proper liability insurance for his business and get a certificate of insurance that says so. Don't rely on his promise. Get it before he comes on to your property.

You'll also have to talk to your insurance agent as you may need a separate policy to cover the barn and landlord's liability.

An uninsured injury claim could cost you many times more than a tax error.

 

[Cooper@1960]

Thanks for the replys. Tax issues aside the more I have thought about this the potential for injury and my liability as the property owner is just to great, I don't need the headache. Thanks again.

 

[Just Blue]

Thanks for the replys. Tax issues aside the more I have thought about this the potential for injury and my liability as the property owner is just to great, I don't need the headache. Thanks again.

A very smart move.

 

[quincy]

Thanks for the replys. Tax issues aside the more I have thought about this the potential for injury and my liability as the property owner is just to great, I don't need the headache. Thanks again.

You probably were paying lower taxes on your pasture land when you used the land and barns for horses.

I think you are smart to think carefully before leasing your land but you might want to discuss the pros and cons with a real estate professional before completely dismissing the idea.

 

[adjusterjack]

Thanks for the replys. Tax issues aside the more I have thought about this the potential for injury and my liability as the property owner is just to great, I don't need the headache. Thanks again.

It's like all the people I read about that rent out rooms in their homes and it turns out to be a nightmare. Same goes for renting out part of your property.

Good decision to not.

You'll find a use for the barn. Maybe start a classic car collection. Or a great big model train layout.

 

[quincy]

... You'll find a use for the barn. Maybe start a classic car collection. Or a great big model train layout.

... says adjusterjack, now wanting very much a barn of his own. Haha.

 

[adjusterjack]

... says adjusterjack, now wanting very much a barn of his own. Haha.

Already have a 30x40 garage workshop in my back yard. And an 8x20 storage container. No more room back there.

Haha back atcha.

 

[Cooper@1960]

There's also the issue of strangers coming onto my property, I'm really not that friendly Then there's also the inevidable 6:00AM phone call from the trainer...oh hey, sorry to wake you, I'm not feeling well, could you go out and feed and water the horses for me? Then turn them out and clean the stalls? Just this once, I promise!

Nope, don't need the hassles.

 

[adjusterjack]

And how about the trainer blaming you for something that goes wrong when he's not there?

Or the trainer's customer blaming you?

Or the trainer not paying the rent and then you have to evict him? And when you do get him out he leaves somebody else's horses behind?

Yep, there's a long list of things that can go wrong. You are wise to avoid the idea.

 

[quincy]

There's also the issue of strangers coming onto my property, I'm really not that friendly Then there's also the inevidable 6:00AM phone call from the trainer...oh hey, sorry to wake you, I'm not feeling well, could you go out and feed and water the horses for me? Then turn them out and clean the stalls? Just this once, I promise!

Nope, don't need the hassles.

You’ve apparently thought it all through. Good for you. Life is definitely easier without hassles, real or imagined.