So I have a condo, considering renting it when I move. My understanding of how taxes work on a rental, would be I would take my (total rental income) - (total mortgage payment (P&I) + property taxes + HOA + any repairs or other expenses I have on the unit)... and anything left over is "income" that I would pay my normal income taxes on. Is this fairly accurate?
I have a 30 year mortgage on the place, and after all expenses I expect to make 1k a month in income. Obviously need to deduct some of that to do with vacancies over the long haul and such, but there is clearly a profit being made. I also make over 100k, putting any extra income in the 28% tax bracket.. so I would be getting hit fairly hard for this profit.
Since I don't NEED this money now (I just want to build equity for later Financial Independence), would it make sense to Refi into a 15 year mortgage? This would add another $500 or so to my monthly bill, making it much more likely that I break even. Or do I take the profit and just invest it on my own to get closer to FI?
If it matters, my 30 year mortgage is at a very good rate (3.625). I would expect the 15 year mortgage to be something like 3.5 today since rates have risen since I got my mortgage (Still a lower rate, but normally you would put a 15 year mortgage at a full point lower than the 30 year rate).
Am I missing anything? My mortgage interest bill to the bank goes down, but since it is a rental not a primary home - I don't get to use it for a deduction anyway.... hummm