Rental property and taxes

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Like a previous poster said, open up a separate bank account and company for the property. You can deduct travel expenses to and from the property, any repairs, replacement of carpets etc, maintenance, and depreciation. This should more than offset any profits you would make on paper. This your net tax burden may just even out.

I'm confused by this last sentence. You don't just get taxed on the profit. You get taxed on the income. Even if you have zero profit, you are paying taxes on the income . I could be misunderstanding something though.

No, you are allowed to deduct the expenses. Example:

Rental brings in 24000 of rent (2k month of rent)

Your expenses are 24000 that year (new roof, new deck, new pool, new appliances, etc). You're essentially not paying taxes. You'll also start depreciating certain things, too. You can also write off milege to/from rental.

You don't pay tax on the 24000 of rent.

Not quite true. The new roof, deck, pool and appliances are depreciable over periods of years. They can't be fully deducted in a single year.

[Anonymous]

first time landlord here. I suggest working with a CPA and don't go with the software. You want to be sure everything is absolutely correct. As for our property, we barely break even. The rental income covers the mortgage and real estate taxes for the property and everything else (repair and upkeep) it comes out of our own pocket. Thus, we incur a net loss on the rental income, which carries over to our earnings and helped us lower our tax bill substantially. factor in depreciation as well, and our losses were bigger than we thought. i don't mind the losses because the money is helping our rental nest egg be in good shape for future tenants, and of course, it's our property. in the normal course of owning owner-occupied property you DONT get a write off home repairs, but with rental income you do. in the end, i am very happy with my decision.

[Anonymous]

Anonymous wrote:first time landlord here. I suggest working with a CPA and don't go with the software. You want to be sure everything is absolutely correct. As for our property, we barely break even. The rental income covers the mortgage and real estate taxes for the property and everything else (repair and upkeep) it comes out of our own pocket. Thus, we incur a net loss on the rental income, which carries over to our earnings and helped us lower our tax bill substantially. factor in depreciation as well, and our losses were bigger than we thought. i don't mind the losses because the money is helping our rental nest egg be in good shape for future tenants, and of course, it's our property. in the normal course of owning owner-occupied property you DONT get a write off home repairs, but with rental income you do. in the end, i am very happy with my decision.

Unless you are making $100k or less or are in the real estate biz, you cannot deduct the losses on your 1040. You carey forward the losses until you sell, and then you can take the loss the year you sell.

[Anonymous]

previous poster said: Unless you are making $100k or less or are in the real estate biz, you cannot deduct the losses on your 1040. You carey forward the losses until you sell, and then you can take the loss the year you sell.

when you say "making 100k or less or in the real estate biz"---do you mean household income has to be 100K or less?? I thought rental income losses can carry forward to earned income ?

[Anonymous]

Anonymous wrote:previous poster said: Unless you are making $100k or less or are in the real estate biz, you cannot deduct the losses on your 1040. You carey forward the losses until you sell, and then you can take the loss the year you sell.

when you say "making 100k or less or in the real estate biz"---do you mean household income has to be 100K or less?? I thought rental income losses can carry forward to earned income ?

Rental income losses can offset W2 earned income, but only for real-estate professionals (which you wouldn't be) or if your household income is below a rather low threshold. I think it is something like $100,000 for a single person and $150,000 for a married couple, and even then there are various phase outs. Even then you can only offset I think $25,000 (or the portion of this that hasn't phased out) from W2 earned income per year with rental losses. There is lots more information on this all here: https://www.irs.gov/pub/irs-pdf/p925.pdf