That empty nest may actually be full of cash

September 01, 1991|By Glenn Burkins | Glenn Burkins,Knight-Ridder News Service

One by one, your children have all left home. Suddenly, you have a house that is too big for your needs.

It might be a good time to buy a smaller home or move into a rental unit, says Edward J. O'Grady, president of the Pennsylvania Institute of Certified Public Accountants.

Either way, you could free up some cash for other needs.

Also, if you or your spouse is 55 or over, you may be able to pocket up to $125,000 in profits from the sale without paying a tax on the capital gains.

But you don't have to sell your house to make extra money. If you live in a resort town, you could rent a room during the tourist season, or only for a few days during popular events.

If you rent your home for fewer than 15 days a year, the income you get would be tax-free. However, you could not deduct any rental expenses you incur.

There are other ways to use your empty nest to generate cash. They include:

* Renting a room to a college student or an older boarder.

* Renting your garage to a friend or neighbor who needs storage space.

* If your house has a special feature, such as a darkroom for developing photographs, maybe there is an amateur photographer interested in renting it.

One precaution: If you rent space, make sure the tenant has insurance to protect whatever he or she stores there.

Also, check with your accountant or lawyer. Renting a property often has tax implications you should not ignore.

You will have to pay taxes on income, and deductions for depreciation may affect future capital gains.

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