This is a very good explanation about tax law changes for landlord.
Every landlord can qualify for 20% pass through deduction. No need to form LLC. Schedule E is totally fine.
If your total income is above the threshold, you can still deduct 20% of net rental income up to 2.5% of the depreciable value for the building.
This is essentially the same information I have posted already on the subject. Read the fine print:
I am waiting for my IRS buddy to see what he finds out from the source…
Ok. Time for all the landlords to quit complaining and admit Trump and the republicans hooked them up huge. We’re all going to be paying less taxes or in other words keeping more of the money we earn. If you prefer paying more taxes, there’s no law that says you need to take all the deductions you’re eligible for.
I don’t think I need to pay any tax on my rentals for the next 10 years at least. Depreciation is your best friend.
How do they determine the base value for depreciation? Isn’t it the taxable value of the physical structure? I’m worried I’ll get hosed on that, since I owned for 6 years before making it a rental. My taxable value is way below market value.
They base the 2.5% on the value on purchase day to benefit IRS. If you bought a house for 500k and now its value is 1.5M, you can only 2.5% of 400k assuming land value was 100k on purchase day.
They still penalize high income landlords though, so working wealthy in Silicon Valley can be hurt a little, but 2.5% might be enough for most working wealthy people
Not only that. If you don’t use up all your depreciation in any particular year you can carry forward to future years. My CPA does that for me. Does TurboTax do that?
Sorry to miss your posting. Many thread gets too long and it’s frightening to go over the thread.
Good news is that we don’t need to form LLC. I like simplicity and we have to say that this is a good tax reform.
The depreciation deduction isn’t as good in CA because so much of the value is the land. It looks like I can add the value of improvements. I need to lookup how much I spend remodeling the kitchen.
If you replace appliance, it’s 100% deductible now.
I think we may have a RE investment boom. If you can get 20% of net rental income tax free, many high income working wealthy may be enticed to become a positive income generating landlord. This could mean a boom in Phoenix, Vegas etc. Also commercial property may become attractive suddenly.
If you have loans it definitely is good. I might have to leverage up to save taxes. Put all the loans in bitcoins so I can beat the net worth contest…, not!!!
You should borrow in bitcoin. When it crashes all the way, the loans will be super cheap to payback.
But what if you borrowed in bitcoin in 2012? Can you declare bankruptcy in Bitcoin?
You always take your deductions every year but you may have a rental loss. You carry the rental loss forward.
I don’t understand why you ever need to carry forward the depreciation.
I did not check whether a rental loss from property A can offset rental income from property B. If so, it would become messy since you need to choose which property to offset and which to carry forward.
Carry forward paper rental loss.
You can deduct property tax for rentals but not for primaries. Tax reform is rewarding capitalist rent seekers like us and screwing middle class w2 wage earners.
Who is doing bitcoin loans?
No prob @BAGB, better to be overinformed than under…
I just want to see how The Man (IRS) is interpreting EVERYTHING before devising a strategy…
I think it makes perfect sense to treat property tax as an expense for rentals.
And it makes no sense to deduct property tax for primary home. If you want to deduct for primary, we need to factor in an equivalent rent for primary home to offset property tax and mortgage interest.
It makes perfect sense to me. Even with this tax reform, primary homeowners still enjoy an advantage to consume their housing vs a renter consuming the same housing. Primary home is a consumption, it’s not a business activity so makes no sense to expense against wage income