Author Topic: so about them taxes  (Read 4476 times)

PAstash

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so about them taxes
« on: November 21, 2014, 01:23:39 AM »
I just purchased my first duplex. i was wondering where i find out about all these awesome tax write offs i keep hearing about. should i have an accountant do my taxes or would a normal person who does income tax be able to handle it. i am ashamed to say i have never done it. thanks for all responses in advance.

sol

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Re: so about them taxes
« Reply #1 on: November 21, 2014, 01:34:27 AM »
You do not need an accountant to do your taxes, but it will be a lot easier if you have filed a 1040 for yourself before.  It's just the same thing plus a little extra.

Tax write-offs introduction:

You can depreciate the value of the building (not the land), usually by dividing your cost basis on the date the property entered service as a rental by 27.5.  So say the building is worth 100k, you would get 100k/27.5 = $3636 in depreciation each year as a deduction.

Whatever amount you pay in mortgage interest is deductible.

Whatever amount you pay in rental insurance is deductible.

Whatever amount you pay in maintenance or service fees like plumbers is deductible.

Your mileage is deductible every time you drive to the rental property for reasons related to property management.

Your gross rental income will get added to your regular job income, and will then be offset by the sum of the deductions above.  So if you're charging $1k/month in rent and make $50k/year at your regular job, your new income will be $62k/year minus the deductions listed above.

Tis not that hard.  Take an afternoon off and read all about it:  http://www.irs.gov/publications/p527/

StashDaddy

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Re: so about them taxes
« Reply #2 on: November 21, 2014, 06:54:11 AM »
I definitely recommend getting familiar with the tax code.  That said, I recommend turbotax software to calculate it all for you.  They ask you all the relevant questions about your rental property, income, and expenses, and make it pretty easy and polished for you.

jda1984

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Re: so about them taxes
« Reply #3 on: November 21, 2014, 08:27:17 AM »

Tax write-offs introduction:

You can depreciate the value of the building (not the land), usually by dividing your cost basis on the date the property entered service as a rental by 27.5.  So say the building is worth 100k, you would get 100k/27.5 = $3636 in depreciation each year as a deduction.


If you live in half, the depreciation rate is twice as slow (1/55) for the time you live there.  As I understand it, when it comes time to sell, you won't need to pay capital gains if you've lived there as your primary residence 3 of the last 5 years, so potentially all that depreciation won't be taxed later.  Otherwise, it will be taxed as capital gains when you sell.  Personally I take the depreciation as the current capital gains rate is less than my income tax rate, but that could change in the future.

waltworks

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Re: so about them taxes
« Reply #4 on: November 21, 2014, 08:30:50 AM »
I am 90% sure the depreciation is recaptured when you sell regardless of whether you are paying capital gains or not. It is tax deferral, not a true "write off".

-W

Lowerbills

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Re: so about them taxes
« Reply #5 on: November 21, 2014, 11:39:06 AM »

electriceagle

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Re: so about them taxes
« Reply #6 on: November 21, 2014, 01:47:46 PM »
You can buy a previous year's tax software on ebay for next to nothing and usebit to go through a simulated return.

Don't forget about the new de minumus rules!

Poorman

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Re: so about them taxes
« Reply #7 on: November 21, 2014, 02:34:08 PM »
I definitely recommend getting familiar with the tax code.  That said, I recommend turbotax software to calculate it all for you.  They ask you all the relevant questions about your rental property, income, and expenses, and make it pretty easy and polished for you.

TaxAct does the same thing for only $18.

JoshFire

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Re: so about them taxes
« Reply #8 on: November 22, 2014, 06:06:25 PM »
Definitely take the depreciation - the IRS will reduce your cost basis in the property like you have taken the depreciation even if you didn't. My tax "professional" hosed me on this and I'm working with him to file amended returns for the last four years...

clarkfan1979

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Re: so about them taxes
« Reply #9 on: November 24, 2014, 04:24:30 AM »
Turbotax

FoundPeace

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Re: so about them taxes
« Reply #10 on: November 24, 2014, 07:25:01 AM »
I've just been studying up on this very thing. Apparently, something that is often missed is making sure to do a cost segregation for your property. This allows you to depreciate your property more quickly.

daverobev

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Re: so about them taxes
« Reply #11 on: December 09, 2014, 10:26:05 AM »
Slightly on topic, didn't want to start a new one:

I'm hoping that the default for rentals is 'accrual' basis rather than 'cash'?

I have a property tax bill to pay, for this year, and I want to pay it when I get a shiny new credit card with a sign up bonus. I may or may not get this card before the end of the year. If I pay the bill on the 10th of January, I still count the bill as an expense for this year.

Right?