Reply to tax implications of rental income?

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[quote=Anonymous]As the others have said, you can only deduct the rental property expenses, depreciation, and mortgage interest from your rental income, not your regular income.  If, for example, your rental income in a year is $25,000, but your rental expenses are $35,000 you will have a loss of -$10,000 on your tax forms.  This is pretty common actually due to depreciation.  Say your salary is 200K.

You won't have to pay taxes on the rental income, since you actually have a loss of $10,000 there, but you can't deduct that loss from your job income either.  You still pay taxes on $200K of salary, not $190K.

What it usually works out to with a rental property is that you have a loss on paper for tax purposes, but in actuality you might be making a small profit while paying down the mortgage against your rental property.  When you sell the house a number of years from now, you can carry forward the loss you had on paper every year to offset some of the gains and recaptured depreciation.  You then pay taxes on the remaining profit from selling the house.  [/quote]

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