(Assuming you own a property that you rent out)
As I understand it the IRS rule says 0% can be deducted from losses at the end of the year if your adjusted gross income is over $150,000. If that is the case what are my benefits as far as taxes go? If I cannot write anything off then how can I be successful in REI otherwise. As far as I’m concerned buying an REI is an additional cost to me. Is that right?
If you are cashflowing (like you should be), you buy a property and the renters pay your mortgage…the left over money after everything is paid may be subject to tax…you are not taxed on the entire income, just hte amount that exceeds the allowable deductions (including the depreciation on hte property!)…
Keith
Keith,
What I’m referring to as far as deducting losses would be like interest from the loan, property taxes ect. With my primary home I can deduct these items but not for REI.
if you’re making over 150k quit yer bitching already! ;D
suppose you have a 5k/yr cashflow from your property. if you have 5k worth of depreciation, that offsets the 5k cashflow making your 5k tax free. if you paid 40k down to buy the property, thats a 12.5% return.
if you’re AGI is over 150k i think you’re probably paying atleast 33% tax, so you would have to get 18%[i think] in any other pre-tax investment to match it.
isn’t that good enough for you? get your wife to spend 750 plus hours on your RE investments with no other job. then you can take unlimited deductions.
<<Keith,
What I’m referring to as far as deducting losses would be like interest from the loan, property taxes ect. With my primary home I can deduct these items but not for REI. >>
Where did you get that idea…not true at all! The Schedule E that you will file allows you to claim:
Advertising
Auto & Travel
Cleaning & Maintenance
Commissions
Insurance
Legal & Professional Fees
Management Fees
Mortgage Interest Paid to Banks, etc.
Other Interest
Repairs
Supplies
Taxes
Utilities
Others
Depreciation
What I think that you are confusing is that, if you do the math (fill out Sched E) and the number is a positive number (a “gain”, that amount is recorded as income on Your Form 1040…if the number is negative (a “loss”) AND you make more than the threshold (you say that it is $150K but I didn’t look), then you cannot subtract these losses from you active income as a Rocket Scientist, Doctor, Sanitation Engineer, etc.
Keith