I feel like I’m going to get hosed a bit on depreciation. I bought at the bottom and CA only increases my assessment 2% per year which is 13% from purchase value. I can only depreciate the assessed value of the structure, right? The market value is almost 2x what I paid. I’d rather depreciate the larger amount, but I don’t think I legally can. I guess my benefit is my property tax expenses are much lower…
Depreciation is virtual expenses with time limit while property tax is real expense with unlimited time (as long as you hold!)
Depreciation ceases after 27.5 years of hold and it is temporary effect. When you sell, you have depreciation recapture which is negative !
Low Property tax is permanent effect. BY paying 1.25% per year, you are paying entire home (building+land) price to county in 40 years. This is exactly like 40 years county loan you pay back. By reduced property tax, you pay half of it and property still appreciates, yield increases when rent/inflation increases.
This is like hanera holding apple since 2009, investment protection, high yield and less real expenses
You are safer here.
.1997. Those AAPLs worth less than the annual dividend.
Uh, cry me a river…
So don’t sell! Let your children inherit them, the law is up the basis unless Trump changes the law.
Uh, what am I supposed to do, Einstein???
Good article. Thanks for sharing.
Now, if you are keeping track, the long-term capital gains tax rate for all but the wealthiest of people is 15%, and a pretty average ordinary tax rate is about 25%. So, the thinking man may say, “Well since the depreciation recapture tax rate is higher than the capital gains rate, I just won’t take any depreciation.” On the face of it that makes sense. Not so fast. The IRS has thought about this and created a rule that when a person sells an investment property the depreciation recapture tax is computed on the amount of depreciation taken or the amount of depreciation that should have been taken. So, the IRS will tax you on depreciation recapture whether or not you take it, so it makes sense to take it.
Does the above rule apply even if you have lived in a home for 2+ years as your primary and then rent it out for less than 3 yrs before selling? Will you need to pay depreciation recapture even in that scenario? Or do you get full $500k gain tax free?
Donate it? Why are you worried about what happens to your money after you’re gone if you don’t have kids? You should probably spend some while you’re still healthy enough to do so. Enjoy it!
Your case is obvious. HELOC and buy annuity!
I told my wifey that I intend to give UCLA some of my money once the ride is over…
(Sounds of crickets…)
You shouldn’t be helping the elite. Help people like yourself i.e. those trapped in HK but can’t come here, sponsor them here.
Aaaaah, second wife…
(Sounds of me getting slapped silly)
You make feel like I’m a pimp!
Well, that explains the fur coat you are wearing and the leapard skin interior of your Lexus…
You made it sound like Hong Kong is a shithole. Really? It has the most expensive neighborhood in the world from what I heard on another post.
Maybe the real shitholes are located here in America… (think Texas)…
Well, in @hanera’s defense he was just generalizing but there is a big wealth gap in HK though (story dated, but presumably still true)
The wider the wealth gap, the better! How else do you explain Palo Alto and East Palo Alto right next to each other?
We escape from places where there’s no wealth gap (China in the 70s).
Hmmm, not that it would amount to anything real significant, I may have to rethink where my money goes. (or this story was conveniently written by my wifey…)
You, wuqijun and …menot (forget the id) are buy and hold mentor for me !