Forced Rental and Taxes

[Number4]

My job relocated me from CA to GA in 2011.
The house in CA was under by about $50k, not including the $100k i'd put down on it.
I'm renting it for $1350/month. Which covers the cost of keeping it, but not maintaining it.
Covers, mortgage, insurance and taxes.
In my eyes, I'm making nothing on it. I understand that the state see's that some one else is paying my priniciple etc.. which is a benefit to me.
I've had the same tenants for 2+ years now. They've never asked for anything and have been great compared to some stories I hear.
So, I don't have any expense to deduct on the place.

What can I do, to make this property a loss each year so it doesn't get added to my income?

Can't dump it now, and don't really want to if I can keep it.

[ercchry]

first step should totally be joining a car forum based in canada :nut:

[busdepot]

What planet of fucked are you from? Someone else is paying into your equity? You are making generating money off the rental which is and should 100% be taxable to you.

If you don't want to generate income, don't rent the property :nut:

[triplep]

^ you do realize that he is from the US right, so they may or may not have different standards, if you have ever looked at a US return, they are not the prettiest thing to look at.

Example: Capital gains on investment property in the US.

As I recall , individuals who bought property as an investment (say to flip) technically did not have to pay capital gains immediately on those sales. If they took the proceeds they had and reinvested in property that was worth more for investment purposes they could defer the payment of their capital gains, (Hence why US tax is so different then Canadian tax) until such a time that they were no longer buying investment properties.

As to the poster, how do you not have any expenses on the property? You said you have a mortgage, property taxes, insurance etc... if this was in Canada the interest paid on the mortgage would be an expense, property taxes also an expenses, insurance also an expense etc. This is from a Canadian Stand Point.

My advice is, speak to a US accountant instead of relying on a mainly Canadian forum for advice, this way you can ensure that you have the correct information.

[busdepot]

^ I did catch that :) The rules are almost identical for rental income on CRA's T776 and on the IRS Form 1040E & 1040C.

OP wants to push his income into the red so he's not taxed on it. There are no operating expenses as his tenants are paying for them. Interest and property taxes are deducted from your gross income, but you are still going to be taxed on the net proceeds and rightfully so.

[ercchry]

i thought you can write-off your primary in the states though?

[busdepot]

Originally posted by ercchry
i thought you can write-off your primary in the states though?

What do you mean by primary?

[ercchry]

Originally posted by busdepot


What do you mean by primary?

like the mortgage where you personally reside...

[busdepot]

You can deduct interest on a qualified home (different than here), but not principal. There are some things you can deduct against your income tax in the US that we can't here, but it's pretty much the same.

I have heard some rumors that smaller, sketchier banks would offer interest only mortgages on homes meaning that the entire payment was just interest and was therefore deductible for taxes. The interest rate was computed in such a way that in 25 years, or however long the term was, the bank would take possession and then sell the home back the owner for a nominal value. The bank then got a nice tax loss. Then when the home owner would sell the house, they could use the exemption allowance for principle residences in the of $250k ($500K for married couples). So everyone was winning except IRS. Needless to say, the IRS had a shit-fit over this and those shenanigans have since been shut down.

If you want to read up about it, IRS puts out some pretty good circulars about how basics work for personal income taxes.

[ercchry]

yeah, so the interest on your primary should offset the principle of your rental... if all numbers play nice

[busdepot]

Sort of, yeah. But you will still be paying some tax on the rental income no matter what, unless there are other expenses. You can't use personal mortgage interest to reduce rental income. You're reducing your own income which means overall, you're reducing your total tax payable, but there's still tax being paid on the rental income. Kind of hard to explain in just text.

[Number4]

Originally posted by ercchry
first step should totally be joining a car forum based in canada :nut:


lol, didn't realize this forum was based in Canada. Also didn't realize you folks had the net up there. eh?
:thumbsup:

[sputnik]

What did you think ".ca" refers to?

[Number4]

Originally posted by busdepot
What planet of fucked are you from? Someone else is paying into your equity? You are making generating money off the rental which is and should 100% be taxable to you.

If you don't want to generate income, don't rent the property :nut:


So, realators and bankers sell loans to masses of uneducated American Dream hunters, ultimately causing the housing market to collapse because everyone bought more than they could afford on interest only loans.
People that purchased houses within their buying power with conventional loans all of a sudden find themselves unable to sell their houses due to these dumb-asses.

If I keep the house, to the point where it is above water....then the "someone else" who's paying into my equity will have done so.
Until that point, I have no equity and am making no money. I only have the house because I couldn't sell it. So, I'm not making shit. But the IRS says, let's add this to your income and by the way 'you didn't pay any taxes on it.' So I'm being taxed for something I haven't received nor benefitted from. AND more than likely won't. You may enjoy giving your money to the government (assuming you worked for it) but I don't. Oh yeah, and it's nice that you can only claim "fair market value" on the return, no matter what your amount owed is.

So now, I don't want to rent the property out. Would you suggest that I simply don't then? Is that a solution? Oh wait, you didn't offer a solution. Just shitty comments that don't help anyone.

[Number4]

Originally posted by sputnik
What did you think ".ca" refers to?


Had no clue. A general web search took me to this forum.

[ercchry]

then sell your investment property at a loss, claim cap losses to offset your cap gains... or just stick it out since rentals are long term investments

[S-FLY]

It's only a loss on paper until you sell the property. You ARE benefitting from the rental, so it is taxable.

Think about it this way: If you had an "interest only" loan on the property and used part of that $1350/month to pay the interest and you banked the rest, then the portion you're banking is the taxable gain. The only difference in your scenario is that you're 'choosing' to use the taxable gain portion of the rent to pay down the principle of the mortgage.

[OU812]

Willing to part out handle?

[Sugarphreak]

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