Apartments in Nassau (VENT and question)

Biggest reasons they don't want to legalize the apartments is:
1) Homeowner would have to pay more taxes on the house each year
2) Homeowner would have to report it as income on their own taxes each year.

In some cases it almost isn't worth it to a homeowner if they have to make their apartment a legal one. They pay so much extra money in taxes.

There are a lot of illegal apartments on long island but there are also plenty of legal ones. Just keep looking and you'll find one.

I understand completely why people don't want to legalize the apartments in their home, and I understand that the extremely high taxes in Nassau almost force people to rent out part of their home, however it doesn't make it right. And if I am the only person who has such a huge issue with this, that concerns me deeply.

Papabear, I'm not from overseas, I'm from oversound. I'm from Connecticut, and I've lived in the Tri-State area my whole life. As for getting off the Island - I'm TRYING!!! It's just that the job market is very bad right now, and I'm grateful for the job that FH has, even though that job requires him to stay on Long Island. My career is pretty portable, so it's not me we have to worry about so much - more him.

Maybe I'm crazy for having an issue, but it's like stealing cable or something. Someone somewhere down the line IS paying for it. I don't want to start this huge controversy, and I'm glad about the reassurance that there are affordable legal apartments. Everyone's been telling me there weren't, and to basically keep my mouth shut, as well as a low profile. Next time a garbage truck tries to kill me I promise to call and register a complaint. LOL

Half of Long Island steals the cable and for what Cablevision charges it serves them right!

If you can find an illegal apartment you love you should go for it and live guilt free!!!

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Posted by Jenn524

Biggest reasons they don't want to legalize the apartments is:
1) Homeowner would have to pay more taxes on the house each year
2) Homeowner would have to report it as income on their own taxes each year.

In some cases it almost isn't worth it to a homeowner if they have to make their apartment a legal one. They pay so much extra money in taxes.

There are a lot of illegal apartments on long island but there are also plenty of legal ones. Just keep looking and you'll find one.

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Something to keep in mind - future homeowners - if you have a rental apartment and it IS legal, you DO have to report this income on your tax return, Schedule E. BUT - keep in mind that you also get to deduct expenses against this income. Examples of this expense include a prorated share of utilities (if not directly paid by tenant), a prorated share of mortgage interest and real estate taxes, repairs and other maintenance as well as a little thing called DEPRECIATION. Depreciation on a residential property is taken over 27.5 yrs which means if you spend 10,000 to fix up the place to make it suitable for rental, then every year you get to take that amount over 27.5 yrs or $364 a year. Certain improvements can be taken over short periods such as five or seven years also.

I mentioned prorated share of interest and real estate taxes - if you're thinking that this is deductible anyway as an itemized deduction on schedule A, you're right, however, it is usually more beneficial to take this share on schedule E than Schedule A. I won't go into logistics but if anyone wants clarification, send me a forum mail.

This scenario applies to the Landlords only, not the tenants.

What the IRS should allow is a deduction for rental expense - now THAT would be a windfall. But I digress...

Posted by Jenn524
Biggest reasons they don't want to legalize the apartments is:
1) Homeowner would have to pay more taxes on the house each year
2) Homeowner would have to report it as income on their own taxes each year.


These points may be true but only if its legal to legalize. In most areas the reason people don't legalize is because they cannot, as per the town building codes. Thats why it is illegal. They are renting apts that are against the law and many times unsafe, only one means of egress, etc....

I wouldn't live in an illegal apt. Too many hassels. And I've complianed for too many years about the illegal renting neighbors in my old neighborhood. Zoned One family houses w/2 and 3 families living in them adding like a gazillion cars to the streets. I won't go on, I am sure the ladies on here who rent are good tenants.

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Posted by shelzyp

Papabear - the landlord should not want to write off the utilities, and depreciate the home, because then you will not be ablt to take the 250,000 or 500,000 if MFJ deduction when you sell the house. If it is business property, even if only 10% you are subject to other rules, and this will result in higher capital gains.

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Actually that isn't entirely true. You are still entitled to the exclusions however not for the amount that was depreciated. For instance, if you and your husband (filing a joing return) buy a home for $300,000 and rent out the basement, taking a depreciation deduction of lets say $1,000 over 2 years. Two years later you sell the home for $600,000, you are allowed to exclude gains of $299,000 and you have to report the $1,000 on the Form 4797 for Sale of Business Property as a capital gain.

That's a good option because long term cap gains are taxed at a reduced rate whereas if you didn't take the deduction in the year of rental, you'd be looking at being taxed at those dollars at your ordinary income rate.

See page 17 of Publication 523 for guidance (available on www.irs.gov).

Taking the depreciation brings you out ahead of the game.

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Posted by papabear

For instance, if you and your husband (filing a joing return) buy a home for $300,000 and rent out the basement, taking a depreciation deduction of lets say $1,000 over 2 years. Two years later you sell the home for $600,000, you are allowed to exclude gains of $299,000 and you have to report the $1,000 on the Form 4797 for Sale of Business Property as a capital gain.

Taking the depreciation brings you out ahead of the game.

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Actually, if you really want to get technical, there are no legal basement apartments in Nassau County. Period. Therefore, I don't think you're legally allowed to take a deduction for illegally sought/achieved gains.

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Posted by jannshari


Actually, if you really want to get technical, there are no legal basement apartments in Nassau County. Period. Therefore, I don't think you're legally allowed to take a deduction for illegally sought/achieved gains.

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my example is demonstrative for legal apartments and is only applicable if you are taking the depreciation deduction. i wasn't being specific to nassau county and should have addressed that point in my example.

you're right ,if the town or jurisdiction does not allow for the legality of an apartment for whatever reason then you wouldnt even be worrying about reporting the income on your return and depreciation wouldn't even be an issue. you would just be doing something illegal.