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My landlord is offering to buy me out of my very inexpensive rent stabilized apartment. I'm assuming I would pay income taxes, but I'm not sure how much I will owe if the buyout is $50,000? It might not be worth moving if a large percentage just disappears. Thanks!
no one can tell you as its added to all your other income and whatever bracket your in is what your taxed. but their could be a big zinger too.
the higher your income the more likely you are to be hit with the ugly amt tax penalty... thats because it applys to all your income ,every penny.
its horrible because it effects you generally 2 years in a row.
the first year you get the penalty based on income and you owe alot in state and local taxes , so you pay those
the 2nd year its not tripped by income but by those nice juicy state and local taxes you paid and now deduct .if your deductions are high in proportion to your regular income you will trip it..
if you want to ball park i usually figure 35-40% of it for federal state local and maybe amt tax .
see if someone has an old version of turbo tax for you to play with and see if the amt is an issue.... or ask an accountant to run it for you. perhaps you can pay estimated and split the state and local tax payments up over 2 years lessening the tax deduction and tripping the amt.
so lets say you got the money in march of next year. ... you send in 1/2 the state and local before dec 31 as estimated .. take that 1/2 as a deduction in that tax year ... you pay the other 1/2 when you file in april the following year and those taxes are deducted the following years return.... .
by the way watch out for underpayment penaltys too.
you need to run the numbers though to see if this works for you.
Last edited by mathjak107; 11-13-2009 at 04:05 AM..
Thanks for your reply. Considering how much higher the rent will be elsewhere, this doesn't sound worth it if 35-40% will go towards taxes. The leftover money would disappear in only a few years.
yeah i agree, if you have long term intentions of not moving then it pays to stay if your rent is that low.... we have a standing offer for our remaining tenants in our rent stabilized co-op apartments by central park of between 50,000 and 100,000 to give up their lease so we can sell ..
out of 9 apartments so far 7 accepted buyouts over the years
The system is disgusting. Think about it. The state government is in effect forcing the owner of a building to either pay a tenant an exorbitant amount of money or continue to take a loss on the apartment each month because the government is artificially setting a ridiculously low rent. What gives a tenant any justifiable right to receive such a windfall? There are tenants in this situation who may be even wealthier than the landlord!
Only in New York. It's sick.
I have nothing to add to this discussion except to compliment you mathjak107 on your thoughtful and objective reply to the OP considering that you're a landlord.
it is what it is, this is the cards landlords were dealt... now we have to play them as best as we can.
there is good and bad,... the bad is when the building was put up back in the 1960's landlords were dupped into becoming part of the rent stabilization group. basically we were told dont worry rents will always be acceptable to you, its only to prevent gouging..
if you join you will get a 10 year tax abatement , mind you this was in 1963 ha ha ha... if you dont you will loose certain tax advantages and you will fare worse.
it turned out to be a lie. it became a political ploy to get votes and the rents went below market .
the good is our building over looks central park and since our family took the building co-op the apartments are worth a fortune once we sell them...
im not happy about the below market rents for decades but the sales have been fabulous...
Thanks for your reply. Considering how much higher the rent will be elsewhere, this doesn't sound worth it if 35-40% will go towards taxes. The leftover money would disappear in only a few years.
You probably aren't in a high enough tax bracket for 35-40% of it to disappear to taxes. It's probably more like 20-30%, assuming you actually report the whole thing.
Only take the buyout if you plan to use it to buy a home in a cheaper city or if you just need that last $X to put toward the down payment on a new home. If you end up left with $35,000, you can buy a modest house or a decent (especially by nyc standards) condo for like $80k in Houston. If you put down $30k, your mortgage payment will be like $400/month. It's less in Phoenix, but it's more difficult to get a job out there.
20% ??????????? ha ha ha are you aware we have a city and state tax here? thats around 11% all by istself . how do you know what their other income is? are they married with 2 incomes? also you certainly dont know if the amt will hit depending on their other income and deductions .. that money is generally reported on a 1099 , we report it that way so the tenant better also report it. its like not reporting income on your w2.
assuming around a total of 100,000 taxible income or so its about 28% federal and around 11% city and state , thats 39% right off the bat .
its about 43- 45% with the amt
Last edited by mathjak107; 11-16-2009 at 02:49 AM..
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