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I own a co-op in NYC, but now i live in CA. I was able to 'rent' it out to a family member. I do not make any income from it. The family member pretty much pays all the bills, none of which is in my name. if anything i am losing money by continuing to pay a mortgage on it.
I know i have to file the income for the 'rental' property, However, do i pay NY income tax even though I haven't lived in New York for about 2 years?
Please provide any legislation or regulation that backs up your statement. I don't mean to sound ungrateful but 10 years down the line if am audited a print out from a online forum would not really help.
Respecting your caution, I think you should talk to an accountant. However, to the best of my very meager knowledge, I don't think you have to file in NYC if you don't make a profit. By the way, I don't think you can be audited ten years down the line, either.
Since you are not in the business of renting, I think you must declare the rent you receive as income and then deduct your costs as deductions like mortgage, real estate taxes for federal.
You probably have to do the same for NYS and then credit what tax you pay against your California Income tax.
I think you might be liable for NYC personal tax because of the location of the building...not sure how the deductions, if any are taken. Maybe just the net is taxed. Maybe non-residents are exempt from this passive income even if generated in NYC. I'm sure some landlord knows better than I.
I do not think your system is wise...why not offer to sell the property to the renter (I presume family) and hold the mortgage?
You really need a good accountant on this one because there are so many elements to consider. Otherwise you will spend weeks sorting it all out and might make a fatal error.
It is VERY complicated once the federal government, two states, and the City get involved.
your supposed to file a non resident ny form and subtract it off your state tax.
dont forget if you declare rental income you better take depreciation on it because the tax law says you will pay it back when you sell whether or not you ever took it.
Can you take depreciation with a single property you are renting out, and probably not breaking even on, or is depreciation only allowed for those running a rental "business?"
everyone who collects rents must take depreciation. thats even individuals who do this with a 2 family home.
unless its changed its the property value less the land value divided by 27.5 years.
while on the surface it looks like a magical gain in profit the truth is the entire amount is recaptured at up to 25% federal plus state and local taxes when you sell. since we have no interest in being landlords ever through retirement we are selling everything off.
tax law says even if you didnt bother to take the depreciation you will pay it back when sold so you damn well better take it.
the tax ramifications of depreciation can be awful later on. its taken off at your regular tax rate but in reality may trip the amt tax later on costing you far more than you took.
all the apartments we own in the city that are being sold have been fully depreciated over the years.
the problem now is that the cost basis is zero and every penny is taxable.
that whopper of a capital gain trips the amt tax everytime.
we get 15% on the capital gain but a flat 28% from dollar 1 on every penny of income and interest. with 2 people working the penalty is huge. deductions for state and local taxes and many other deductions are phased out to zero too.
the issue now becomes that the huge nyc and nys tax bill we pay trips the amt again next year too even with normal income just from our jobs and no sales.
the depreciation allowance is a band aid to help in the short term but unless you die with the property it comes back to bite you with a vengence later on. the amt penalty last year over and above our regular taxes due on the gains was 16,000 bucks extra on top of paying back all the depreciation at 25%.. im expecting about a 10k penalty this year again from the large state and local tax deduction if we sell nothing this year.
they can keep that allowance as far as im concerned. its no benefit today when just regular incomes of a working middle class family couple can trip the amt tax so easily just because they paid alot in local taxes the year before...
Last edited by mathjak107; 10-16-2011 at 08:18 AM..
I never said landlords pay less tax on their money (although the capital gains rate is VERY VERY generous when a building is sold.)
But what I said was that landlords MAKE a LOT of money...and then whine about how put-upon they are by their savage tenants.
Thanks for the elaboration on depreciation and reclamation. I didn't know a two family claim it as an expense against rent.
The logic of course of depreciation reclamation is that a charge is taken against income because of 'wearing out" the property. But then, so often the situtation is a landlord buys a place for $100,000 collects rent for decades and chages depreciation of the total $100,000 because it is completely worn out, i,e, worthless, but then turns around and sell it for $1,000,000... gee, not so "worn out and worthless" after all.
What the government is saying, in actuality is that these buildings DON'T wear out and the increasing price makes this clear...so deprecialtion is reclaimed against profits of the sale.
It's not like a cab that is used to death and depreciated to zero. After it is put out of service it really HAS no value.
lately the way real estate has been plummeting in some areas that worn out cab may have a better resale value ha ha ha.
yeah that depreciation allowance is a double edge sword. it makes the property look more profitable but it can bite you sooooo hard when you sell. it all gets recaptured.
that damn amt tax has a way of sneaking its way into places where you least expect it to have an effect. i remember when we sold our first 200 central park south apartment and seeing the cost basis was zero. i was sure it was a mistake . im going it cant be all taxable,thats impossible. boy was i wrong....
Last edited by mathjak107; 10-18-2011 at 04:51 PM..
lately the way real estate has been plummeting in some areas that worn out cab may have a better resale value ha ha ha.
You may have a point there.
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