Posted by Diane (TX) on June 22, 2003 at 10:53:25:
Generally, if you have high LTV loans on a rental property, you shouldn’t be showing much taxable income. Are you sure you’re picking up all your expenses? Mortgage interest is deductible, and so are real estate taxes, insurance, HOA dues - the list goes on. For example, you probably got a Form 1098 from your lenders. The reported interest and taxes on the 1098 are deductible expenses on your Schedule E.
Check out all the expenses in the IRS publication on rental property: http://www.irs.gov/pub/irs-pdf/p527.pdf . If you’ve filed your return, amend it to include expenses you haven’t included before. I’d suggest at least taking your return to H&R Block and have them review it and prepare the amended returns. Yes, it may “cost” you a few bucks, but that’s a deductible expense, and will probably save you a significant amount.
Maybe someone can help me. I have a house that Im renting with a first and second mortgage averaging around $1200 a month. When I filed my 2002 taxes I had to enter my total income including my income from the rental property which came to $14400. Well none of this money goes into my pocket, the whole $1200 goes toward the first and second mortgage. I did a depreciation and I had no repairs that I could use as a tax write off, so I ended up owing the IRS nearly $2000, between Federal and State. I thought having renting property was suppose to be a plus, but Im missing something or I havent dont enough studying. Maybe somebody out there can give me some input, I would greatly appreiate it.
I think that Diane is right. Something is amiss. Assuming any kind of interest rate on the first and second and depreciation on a high rent to FMV ratio priced house, I couldn’t come up with anything close to $2,000 tax on $14,400 rents. I think the interest deductions are missing.