I'm thinking about buying a small apartment complex. The income would be around $300,000 a year after property taxes. I know I would have to pay property taxes, but would the government also tax the $300,000 income?
2007-07-21 22:22:43 · 4 answers · asked by Romell M 1 in Business & Finance ➔ Renting & Real Estate
Yes because you have to declare a gross amount of all of your income for that year. Your rental income would count as part of your yearly gross income when you file your taxes. But realize at the same time that mortgage is also most likely tax deductable where you live. Great investment!! I wouldn't let the tax issue scare u from it.
2007-07-21 22:33:49 · answer #1 · answered by cutegirl 2 · 0⤊ 0⤋
You can deduct all ordinary and necessary expenses that you incur in the generation of the rental income. That includes mortgage interest, property taxes, repairs, maintenance, utilities paid by the landlord, commissions, management fees, insurance, and depreciation.
Depreciation is important because when you eventually sell the property any depreciation allowed or allowable will be subtracted from your cost basis which will effectively increase your gain on the sale, whether you took the expense deduction for it or not.
After the expenses are subtracted from the rental income, any net income remaining is taxable as ordinary income. If you have a loss, some or all of the loss MAY be used to offset other income subject to the passive activity loss limitations. If you actively and materially participate in the management of the rental activity you may use up to $25,000 in losses to offset other income. Any excess that can't be used may be carried forward to future years.
2007-07-21 23:01:30 · answer #2 · answered by Bostonian In MO 7 · 2⤊ 0⤋
Yes, the gov't will want income taxes!! Of course, you get to take off straight deductions for maintenace and repairs, a portion for improvements and there is always depreciation to consider. If you're getting that much rental income you need a professional to prepare your tax return. You should also be making estimated payments to the IRS, both Fed and State, during the year to avoid getting hit with a hefty penalty for underpayment of taxes.
2007-07-21 22:39:27 · answer #3 · answered by sursumcorda 6 · 0⤊ 0⤋
you have to pay income tax on the income you receive as rent, after deducting some excemptions given in the IT rules.
2007-07-21 22:31:52 · answer #4 · answered by potamal s 2 · 0⤊ 0⤋