Tip of the Month - June 2010
MAKING THE RENT-Understand Your Taxes
Source: Real Estate by Laura Washington
The good news is that Uncle
Sam offers substantial tax advantages to owners of investment
property. As a Landlord, you are able to subtract depreciation
and mortgage interest from your rental income (and in the case of a
loss, from your adjusted gross income if it is under $150,000).
You can also depreciate the part of the purchase price that represents
the building-though not the land it sits on, over a period of 27.5
years. Additionally, you can write off property improvements and
other operating costs associated with running the business.
One big caveat if you are considering renting out a property
that had been your primary residence: Such a move can bite back when
you are ready to sell. For one thing, a rental property does not
qualify for the same capital-gains benefits as a primary residence: for
another, deductions you have taken for depreciation can mean higher
capital-gains penalties. As New York City fee-only financial
planner and attorney Gary Schatsky puts it, “Think long and hard
before renting-you are giving up the opportunity to earn a tax-free
Tip from Crossett Real Estate Services
always a good idea to consult with a certified-licensed tax agent or
your legal counsel regarding any/all tax issues and impacts including
but not limited to your goals and objectives prior to investing and/or
renting your properties. Tax laws change often, so keeping up to
date is also a good idea.
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This web page was updated on 06/02/2010.