Calling Tax Gurus II

[SlowlySinking]

Re: Calling Tax Gurus II

Rentals have many monetary advantages, if you live in the rental for two of the last five years before you sell the appreciation is yours and the capital gains is zero, subject to a 250k limit for a single person and double that for a married couple. Sale price minus the cost basis of course. The key is having a good tax person who knows what the tax code says.

 

[--GQ--]

Re: Calling Tax Gurus II

You also have to consider the fact that profits from Real Estate sales and interest earned on it is taxable. True a CD account will earn you 4.25%. Minus taxable interest, 3.75%(rough estimate) at best. <br /><br />Suppose you earn $1,000,000 from Real Estate sales. $900,000 after tax. Now suppose you put $700,000 into a CD leaving $200,000 for daily exspenses. $700,000 at 3.75% is a little over $26,000. With today cost of living, you will be dipping into your saving account. At some point your CD wil disappear.<br /><br />On the flip side, if you have a plus rent to mortgage ratio, having money tied up in rental properties is not bad at all. At least in the long term. You can sleep well knowing you have a constant cash flow rolling in on the first of every month to eternity. <br /><br />Essentially someone is paying you thousands every month inaddition to building up your equity. The only problem is paying taxes at the end of the year. I don't think any "good tax person" can do anything about it.

 

[KRS]

Re: Calling Tax Gurus II

I think your outlook, although correct is a rosy one. Most real estate investors I talk with have never gone through a true downturn in the market, the kind that brings BK to the doorstep. A CD will always pay the rate guaranteed by the bank, but there is absolutely zero guarantee that your real estate will 1) go up in value and 2) rent with little or no vacancy.<br /><br />I don't disagree with "tying" money up in mortgages, but I think that it should be part of an overall strategy that includes diversification in several investments.<br /><br />Many, many people lost their shirt in the 80's when prices adjusted, anyone who owns rentals should be sure they can weather the hard times.<br /><br />GQ, I am glad you're making money at it, and Uncle Sam thanks you too

 

[BassMan283]

Re: Calling Tax Gurus II

Try this link. Scroll down the page for depreciation and repair info. web page

 

[--GQ--]

Re: Calling Tax Gurus II

KRS, your idea makes sense, but my case is unique. And yes Uncle Sam loves me. We exchange gift cards around April. I see it as giving back to the community. Helps me sleep better.<br /><br />MassMan283 thanks for the link. There are a few things on that site I was clueless about. Saying Goodbye to H&R Block. Hello Turbo Tax. This maybe the begining of a happy ending.