Hello,
I was wondering if I manage to get tenants and produce positive cashflow in my dwellings what percentage of my profits goes to the
government?
Also what is depreciation? and how does it work.
Thanks in advance for your knowledge
The amount of taxes that you need to give to the government has a lot of factors. Basically, you will be taxed at whatever tax bracket you fall into due to your income.
You take all of your rental income, subtract all of your allowable expenses (including depreciation) and whatever is left is what you owe taxes on…
Depreciation is an accounting exercise. It is an incentive by the government to provide housing. Basically you take the value of your rental building (not the land it is on, just the building) and divide it by 27.5 years. This amount is subtracted from your profit on your tax return. For example, you own a rental house that is worth $110K. Every year that you have it as a rental property, you can take $4,000 ($110K / 27.5) off of your rental income for depreciation. In some cases, this will mean a negative number. If you meet certain income level restrictions and are “actively involved” in the rental process, you can offset your income from your “real job” with this negative number.
Hope this helps.
Keith
;D Yes it does,
Thanks for your time and patience!!!
That’s what we’re here for…
I know one thing is certain:
Taxes from your cashflow is minimal compared to a regular employee. That’s really sad, (Social Security tax…Who knows if S.S. is going to be around in a few years , Fed Tax, State tax and whatever else the government can think up) Compared to just one
tax on your cashflow, Is it Capital Gains tax?
That’s one of the reasons why owning a business is more financially beneficial then being an employee.