• Rental income: $14,000 • Operating expenses: <$5,600> • Pre-tax income: $8,400 • Property depreciation: <$4,000> • Bonus depreciation: <$10,000> • Taxable income: $0
Go to www.learn.roofstock.com/blog/what-is-bonus- depreciation by Jeff Rohde
Depreciation of the property itself, regardless of any work done, is also a tax deduction, and it’s done over the course of time. Commercial properties can depreciate over a longer time than residential (currently 39 years versus 27.5 years). The land on which the property resides never depreciates. If you rent out a property, sometimes depreciation can get you a phantom gain. Here, on paper, the numbers look like a loss; however, because of the depreciation amount, you actually come out ahead. A tax attorney or CPA can help you figure out exact numbers for your situation. RENTAL TAX SPECIFICS Rental property owners are open to a variety of benefits, which I’ve listed below. You’ll notice that several are the same as for other real estate investments. Also, as with all properties, if you sell within a year of buying, you’ll be taxed at your income rate. If you hold on to a property for a year or more, as is usually the case for rental properties, you’ll deal with capital gains tax, which is a lower rate. Your overall tax deductions can depend on what type of investment business you have (sole proprietorship, partnership, or corporate entity). And, as always, do your research to make
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