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The rental money (18k) will be considered income, but you will have deductions to make it lower, such as depreciation on the purchase price, taxes, utilities & any repairs etc you pay for.
Let's say I buy a small house for 300k cash, and do no work to it.
I then rent it out for $1500/mo, or 18k/yr.
I pay the prop taxes and water, which are 8k/yr.
Do I pay income taxes on the 10k, or do I not, because that 10k is not really profit. At least not until I make back the 300.
How does this work?
It works by educating yourself about tax rules for landlords. Lots of online resources. Then you hire a CPA to confirm that what you think you've learned is, in fact, accurate.
Also, Be sure to read the Landlord/tenant regulations that apply specifically for the location of your rental.
(Yeah, I know that sounds snotty, but it's accurate, good advice.)
Hi
Let's say I buy a small house for 300k cash, and do no work to it.
I then rent it out for $1500/mo, or 18k/yr.
I pay the prop taxes and water, which are 8k/yr.
Do I pay income taxes on the 10k, or do I not, because that 10k is not really profit. At least not until I make
back the 300.
How does this work?
Go to the IRS website, for the best resources, and study schedule E and its instructions.
Let's say I buy a small house for 300k cash, and do no work to it.
I then rent it out for $1500/mo, or 18k/yr.
I pay the prop taxes and water, which are 8k/yr.
Do I pay income taxes on the 10k, or do I not, because that 10k is not really profit. At least not until I make back the 300.
How does this work?
This is why many investors finance their purchases, the payments are deductible from the operating income. Plus, they're not spending liquid assets like you did.
however when one sells that depreciation is recaptured
The depreciation is recaptured whether you took it or not, so it should be taken. Also, land is not depreciated, so the purchase price has to be split between land and structure to determine the amount to be depreciated.
The depreciation is recaptured whether you took it or not, so it should be taken. Also, land is not depreciated, so the purchase price has to be split between land and structure to determine the amount to be depreciated.
yes , many don’t realize whether they took it or not it gets recaptured
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