Homestead Exemption and sub-leasing a house you live in?

[TopHatFox]

I could use some help with this and the research is looking to be a pain. If my parents live in a two floor house, and want to rent the top floor out, is that fine legally? I don't think the HOA cares as long as there's enough parking spaces and the neighbors are happy.

The accountant said something about the Florida Homestead Exemption/ Federal Homestead Exemption. I believe it just means that you can only take the exemption if you live in the house you're renting, which in this case we'd be doing.

Another question I have is whether the rental income would count as taxable income, that I would then have to defray by throwing more $ into retirement accounts and finding more exemptions/deductions? I believe it is an income line from doing my 1040 last year.

Perhaps some of you have experience from being landlords yourselves.

[chenda]

I don't know about US law but you might want clarify if the top floor would be self-contained or would retain a functional dependency on the main dwellinghouse.

[Jin+Guice]

I'm not a landlord but I have an airbnb in my house, so I'm sort of a landlord. The homestead exemption in Louisiana refers to an exemption from part of RE taxes for your primary residence. It is also used for other purposes (such as air bnb license eligibility and legality) as a de facto determination of whether or not the house is an (owner occupied) residence or an investment property.

I believe air bnb income and long term rental income are taxed the same way, which if memory serves is reported on a 1099K? It is taxable and does not count as earned income, which means you don't pay FICA but you also can't stash it in your 401k (you are allowed to put 100% of earned income in your 401k/ IRA as long as it's under the contribution limits, though). I'd double check that this is how it works for longterm renting, but I'm 99% sure it's true.

[The Old Man]

I don't think the HOA cares as long as there's enough parking spaces and the neighbors are happy.

Rather than "thinking" you should "know" what the HOA rules have to say on the matter. Know your risks in advance before you take them.

[TopHatFox]

I read their newsletter and it said you can rent your house as long as there's no parking conflicts and essentially, no tenants being nasty to the neighbors.

The taxation piece is weird, which is why a lot of ppl in FL just have tenants pay in cash. Seems sketchy to me.

Top floor has two really nice south-facing rooms and a full restroom. Kitchen = mini-fridge and a few kitchen appliances. Great for grad students, which is exactly who I want. Laundry is downstairs or at a laundromat. Fire extinguisher and fire/carbon monoxide alarms are installed. There are two doors separating the top from the bottom.

[Laura Ingalls]

There is no federal homestead exemption as property taxes are a state/local thing. What the rules are depend on the locale. I have owned three houses in three states all owner occupied. In one state the homestead exemption is roughly half of your liability. The second doesn’t have a homestead exemption at all. The third is that you are exempted from the first $Xxx if you are owner occupied. The exact amount varies by a bit by county and year.

The bigger issue is to have a legitimate rental.