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document Do rental properties offer good tax sheltering?
By Jason Watson (Google+) Perhaps. There are two issues- passive loss limitations and future income tax rates, and we’ve divided this general question into three questions and three answers- Part 1 - Do rental properties offer good tax sheltering? Part 2 - How do passive loss limitations...
16 Oct, 2012 Views: 0 Comments: 0
document How do passive loss limitations affect me?
By Jason Watson (Google+) This is the second question and answer of a three-part series. Part 1 - Do rental properties offer good tax sheltering? Part 2 - How do passive loss limitations affect me? Part 3 - Is depreciating my rental a good thing? In our first part, we discussed the...
13 Jan, 2013 Views: 0 Comments: 0
document Is depreciating my rental a good thing?
By Jason Watson (Google+) This is the third question and answer of a three-part series. Part 1 - Do rental properties offer good tax sheltering? Part 2 - How do passive loss limitations affect me? Part 3 - Is depreciating my rental a good thing? So, is depreciating my rental a good...
16 Oct, 2012 Views: 0 Comments: 0
document What is active participation versus material participation?
By Jason Watson (Google+) For rental properties, the issue is nearly moot since active participation relates only to rental real estate activities and is a less stringent standard than material participation. As long as a taxpayer participates in management decisions in a bona fide sense, he...
13 Jan, 2013 Views: 0 Comments: 0
document What are the exceptions to rental activities?
By Jason Watson (Google+) There are six exceptions to the definition of rental under Income Tax Regs Section 1.469-1T(e)(3)(ii). These activities are deemed a business. As a result, the active participation standard and the $25,000 passive loss allowance do not apply. If the activity falls...
13 Jan, 2013 Views: 0 Comments: 0
document Rentals Owned by an LLC Fallacy
By Jason Watson (Google+) Should you put a rental in an LLC? Sure. Why not? Everyone else does. The real answer is Perhaps. There are several myths out there regarding the use of an LLC as a shelter from potential lawsuits and litigation, but most concerns stem from tortious liability. So,...
28 Dec, 2013 Views: 0 Comments: 0
document What are tax issues with an LLC owning a rental property?
By Jason Watson (Google+) None. However, if you elect to treat your LLC as an S-Corp you might run into another level of unnecessary taxation. Here’s why- rental properties are considered passive income even if you actively or materially participate in the rental activity. Passive income by...
15 Dec, 2013 Views: 0 Comments: 0
document Do I need receipts for my rental expenses?
By Jason Watson (Google+) Not always, but there are some rules. First, for any single transaction over $75 you need to demonstrate that you paid for the expense- canceled checks or credit card statements are satisfactory. If you pay with cash, you must maintain a record or logbook of...
13 Jan, 2013 Views: 0 Comments: 0
document What rental property expenses can I deduct?
By Jason Watson (Google+) There are several expenses that are associated with your rental property that you are allowed to deduct. There are obvious ones such as advertising costs, mortgage interest, utilities, depreciation, etc. But there are also ones that are more obscure. Vehicle expenses...
13 Jan, 2013 Views: 0 Comments: 0
document How are repairs and improvements different?
By Jason Watson (Google+) One sticky area is repairs versus improvements. Repairs are expensed and deducted in the current tax year, whereas improvements are capitalized and depreciated over time. Most rental property owners want to expense as much as they can to gain the immediate tax benefit....
16 Oct, 2012 Views: 0 Comments: 0
document If I move back into my rental, how does that work?
By Jason Watson (Google+) Well, it can actually help you quite a bit. If your rental property has increased in value over the years, gains on recaptured depreciation is taxed at your ordinary tax rate up to 25%, while the remaining gains are taxed at your capital gains rate (either 0% or 15%...
10 Nov, 2013 Views: 0 Comments: 0
document Can I rent out half a duplex or a room in my house?
By Jason Watson (Google+) Yes. We split things up based on common and dedicated spaces. Things can get a little tricky when you sell the property since a portion was investment and subjected to depreciation recapture and capital gains taxes, and the other portion is exempted since it was your...
16 Oct, 2012 Views: 0 Comments: 0
document If I don't have any rental income can I still claim a loss?
By Jason Watson (Google+) Yes. The Tax Court recently ruled that you can deduct rental losses for up to two years while you actively try to rent the property. There is a potential sticky point- let’s say you purchased a property in January but through required improvements, the property was...
16 Oct, 2012 Views: 0 Comments: 0
document I purchased a rental property last year. What closing costs can I deduct?
By Jason Watson (Google+) None. Just kidding. All kidding aside, only mortgage interest and qualifying real estate taxes may be deducted. Points associated with the value of the property are amortized and deducted over the life of the loan- Everything else such as legal fees, recording fees,...
16 Oct, 2012 Views: 0 Comments: 0
document What is considered rental income?
By Jason Watson (Google+) This answer is straight from the IRS (Topic 414)- Most individuals operate on a cash basis, which means they count their rental income as income when it is actually or constructively received, and deduct their expenses as they are paid. Some specific types of income...
16 Oct, 2012 Views: 0 Comments: 0
document My rental sale was a huge loss. What can I do?
By Jason Watson (Google+) With the current economic and housing conditions, selling a rental property for a loss is a common occurrence. And at times the loss is so great that it eclipses your taxable income. Provided you held the property for more than a year, the sale will be considered a...
16 Oct, 2012 Views: 0 Comments: 0
document Can I claim my residence as a rental, sell it for a loss and deduct the loss?
By Jason Watson (Google+) Yes, but practically No. Many people are upside down on their personal residence where the mortgage exceeds the value of the home. And naturally taxpayers want to deduct this loss when they sell their home. Losses on personal property including your residence are not...
18 Dec, 2012 Views: 0 Comments: 0
document How do I handle my foreign rental property?
By Jason Watson (Google+) Foreign rental properties owned by United States citizens are treated the same way as domestic rental properties with the exception of depreciation. Under IRC Section 168(g)(1)(A), ‘any tangible property which during the taxable year is used predominantly outside the...
16 Oct, 2012 Views: 0 Comments: 0
document Can I deduct the taxes associated with public improvements?
By Jason Watson (Google+) Generally you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. These include assessments for streets, sidewalks, water mains, sewer lines and public parking facilities. For example, the city refurbishes a...
16 Oct, 2012 Views: 0 Comments: 0
document What are the rules on a home office deduction?
By Jason Watson (Google+) If you use part of your home for business, you may be able to deduct expenses for the business use of your home, but there are some rules. To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your...
12 Jan, 2013 Views: 0 Comments: 0

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