Rental income question (San Antonio, Anthony, Anton: sale, renter, insurance)

[Andrewraymond82]

I was just given a home that I will use as rental income. I have nothing invested in this property. The property has a current renter paying $1,200 per month.

My questions are:
1) for tax purposes, should I form an LLC on this property?
2) other than paying property taxes, what income do I need to devuldge when incone tax comes around?

New at the income property process. Thanks for the advice in advance.

[TexasRedneck]

You need a CPA/Accountant, NOT internet advice.

[TrapperL]

You need a CPA/Accountant, NOT internet advice.

Absolutely 100% correct. You'll have to determine your index of cost should you sell the place in later years. There will be a net gain or loss on the value. You'll need to set it up on a depreciation schedule which is a deduct for you. There are costs associated with ownership that CAN be a tax deduct but a CPA is the guy that needs to set all of this up for you. As far as a LLC, I doubt it but then again, that's for a CPA to answer and depending on your age, might even want to move it into a living trust.........again, a CPA can make that determination. All kinds of options but not all fit your specific needs.

[TexasRedneck]

Will say this, though.....unless the transaction has been completed, do NOTHING until you've spoken with the CPA. If you're given the property, your cost basis (and future sale) will leave you with a pretty good-sized tax liability. I'd be asking about having it willed, or a sale with it being bequeathed to you at death. There's ways to get it done without screwing the pooch tax-wise.....if you explore your options in advance.

[WVREDLEG]

Are you managing the property yourself?

There are several tax implications associated with your answer. "Passive activity" and actively managing your property can be a critical test of how you can claim certain deductions on your property.

Rental income is reportable income.
Rental property can be depreciated for tax purposes, including appliances.
Maintenance and repairs can be deducted for tax purposes.
Property taxes can be deducted for tax purposes.

That said, your tax situation is uniquely yours. These things all have rules, limits and tests that result in different benefits and liabilities for each taxpayer.

I agree with the advice to hire a tax accountant to at least start you off. Preferably one who will explain the forms and the code in everyday terms. Ask yourself if you want to risk getting it wrong the first year and trying to undo your mistakes 2-3 years from now?

As far as setting up a business entity, just don't confuse the protection of incorporation with insurance. The best way to protect yourself and your assets is with a legal lease contract, and good insurance (both for property damage AND liability). No matter how you decide to operate, don't get cheap on insurance.

The tax code is excruciating. There are a few different depreciation algorithms and you have to pick one and stick to it for that property.

Make sure you keep invoices and receipts for everything done to repair or maintain the property.

[steve807]

If you inherited it, no tax if you sell it. Probably sell pretty fast if you have a good renter in it and price it right.

[jr6035]

Originally Posted by steve807

If you inherited it, no tax if you sell it. Probably sell pretty fast if you have a good renter in it and price it right.

I'll buy it. I'm lookin for a rental in San Antonio. While I'm at it, anybody know a good, honest realtor?

[TrapperL]

The guy I use is Mike Anthony, Realtor. I've known him about 20 years and he plays with everything on top of the table, no hidden agenda with Mike. 493-3030

[jr6035]

Originally Posted by TrapperL

The guy I use is Mike Anthony, Realtor. I've known him about 20 years and he plays with everything on top of the table, no hidden agenda with Mike. 493-3030

is this 512?

[Paka]

We explicitly got rid of rental property because after a certain level of income, it was NOT deductible....something to consider.