Ianhash, Home Buyer in Upper East Side, New...

If I buy a home and rent it out but have a mortgage. Do I still pay tax on that money if I don't make a profit after paying mortgage, prop tax,?

Asked by Ianhash, Upper East Side, New York, NY Mon Feb 21, 2011

etc?

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4
Ianhash,
Your question is best answered by an accountant because they can explain depreciation to you. Rental income counts as personal income. An accountant will decide how to factor these other expenses you mention into the equation.
1 vote Thank Flag Link Tue Feb 22, 2011
First of all, if you are buying explicitly to rent, then do investigate setting up an LLC to own the house.

A tax advisor (preferably a CPA firm) and your lawyer need to be consulted on that. New York State is quite LLC friendly compared with other states, such as California.

The LLC (limited liability company) has numerous advantages, including potentially some tax advantages, depending on your situation.

The short answer to your question is that you can legally take many deductions, including depreciation, and potentially you can end up with a nice tax write-off in years when you don't make a "profit" (a word that has quite a few definitions, by the way). BG in Phoenix seems to be suggesting you can be "creative," I am NOT that kind of taxpayer and I do not approve of anything that is not strictly legal. I believe in following the law as faithfully as possible. That said, the reality is that the tax code has a lot of nice provisions for landlords that you can take advantage of once you own an investment property.

Karla Harby VP
Rutenberg Realty
kharby@crrnyc.com
1 vote Thank Flag Link Tue Feb 22, 2011
I would recommend speaking with your tax preparer, accountant or tax attorney.
1 vote Thank Flag Link Tue Feb 22, 2011
rental income - expenses = taxable income and if taxable income is less than zero then no taxes. And people are VERY create when it comes to the type of expenses.
1 vote Thank Flag Link Mon Feb 21, 2011
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