can rental properties loss be claimed against regular income? how to deduct depreciation of the property?

Question

We are trying to buy a rental property. Wondering how the tax shelter part works. What things can be deducted. Heard from an accountant that inactive income cannot be deducted from regular income. How those people investing on real property saving money. How to calcuate the cash flow.

Answer 1

First off, rental income and rental expenses offset each other. Then if there is a loss (insurance, taxes, interest, repairs, depreciation greater than income you have a loss) you may claim it against other income. Depreciation is not treated differently than other expenses.

If you have a rental loss (even though it may be cash flow positive) then it can offset other income. Unless your business is "real estate" this may be considered a passive loss and there are limits on how much of a passive loss you may be able to take each year.

Check with a CPA or tax professional for full details.

Answer 2

NO! there is not any artwork around, wanting promoting it (at a loss), which you probably did no longer do. You owe the completed $8000 returned on the 2011 tax return. you will desire to no longer have particularly any start up expenditures on a apartment. You *do* would desire to get an appraisal of what the valuables became into nicely worth on the time you converted to apartment assets as your foundation for depreciation is the lesser of your cost foundation or the FMV on the time. (Any loss that got here approximately mutually as you lived in it in simple terms isn't deductible.) If the schedule E shows a loss, and in the adventure that your earnings isn't too severe, a loss on E ought to deliver your taxable earnings and tax down.

Answer 3

Yes, you may deduct such losses from your personal income. Operating expenses, such as property taxes, insurance, maintenance and repairs, plus an annual depreciation amount on the structure itself may be counted towards costs used against rental income. I hope this 'accountant' is not the one you use for tax preparation.