Re: Good news and bad news… - Posted by David Krulac
Posted by David Krulac on October 12, 2003 at 13:06:48:
lets say you had $12,000 income and $10,000 expenses, if you earned less than $100,000 you could take say $4,000 of depreciation for a total loss of $2,000.
Income minus (expenses + depreciation). Since you earn more than $150,000 then you can’t use the extra $2,000 loss.
For long term buy and hold there is an excellent book by that name “Buy and Hold” by David Schumacher. Some of the advantages of rental property are that:
-
Tenants essentially pay off the mortgage.
-
Property presumably will appreciate, owner gets benefit of increased value and doesn’t pay tax on the appreciation until the property is sold.
-
If you exchange the property rather than sell, you postpone the tax bill, possibly idefinately.
-
The accumalated depreciaiton NOT taken will ofset any capital gains when you do sell.
-
For most people the capital gain rate was reduced May 6, 2003 to 15%. You can transfer income from your salary bracket to the 15% by using the untaken depreciation as well as appreciation on the property.
-
There is another tax element called recapture which remains at 25%. That does tax depreciation of the property.