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Rental Property Income

glck23 429 62 December 21, 2015 at 09:43 AM
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Good morning, i bought a 4 unit rental property in 2013, it was short sale, $190,000 loan , property appraised at $438,000 . each unit is $800, total income from property is $3400 (garages are extra) and the mortgage is $1300. i pocket $2100 cash. I have a full time job, making $53,000yr. What is the best way to report rental property income when filing taxes next year (2016)? Will I get taxed heavily? Will reporting this additional income boost my total yearly income to $78,000 , putting me in a different tax bracket? I got $78,000 by adding my full time job salary of $53,000 and the income i got from rental property of $25,200yr.

Thanks!

19 Comments

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#2
Have you considered forming a company and having the company profit the $2100? A company can buy many things for your business use, including paying part of your rent/mortgage and utilities for the office space you have designated in your house. As it stands now, you'll be paying self-employment tax, and will be taxed higher than you would be if the company were being taxed instead. You can be creative in which ways the company's profits are allocated so that the tax burden is minimized.
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#3
Quote from poignant View Post :
Have you considered forming a company and having the company profit the $2100? A company can buy many things for your business use, including paying part of your rent/mortgage and utilities for the office space you have designated in your house. As it stands now, you'll be paying self-employment tax, and will be taxed higher than you would be if the company were being taxed instead. You can be creative in which ways the company's profits are allocated so that the tax burden is minimized.
This clown is someone you don't want to do your taxes ^^^^

If he's the owner of said company, who do you think will pay the taxes?

This post has sooooo much stink in it
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#4
Quote from glck23 View Post :
Good morning, i bought a 4 unit rental property in 2013, it was short sale, $190,000 loan , property appraised at $438,000 . each unit is $800, total income from property is $3400 (garages are extra) and the mortgage is $1300. i pocket $2100 cash. I have a full time job, making $53,000yr. What is the best way to report rental property income when filing taxes next year (2016)? Will I get taxed heavily? Will reporting this additional income boost my total yearly income to $78,000 , putting me in a different tax bracket? I got $78,000 by adding my full time job salary of $53,000 and the income i got from rental property of $25,200yr.

Thanks!
You have no other bills for this property?
water
common electric
heating, trash
taxes
insurance
??
painting, turn overs, repairs, etc.....

You claim it on Schedule E.

You're correct on adding the income to your income
But don't forget about the deductions (above) that you get to take off your income. And depreciation...(few thousand deduction every year)

I spend 30k year on utilities
15k insurance
10k+ repairs/maintenance
nothing on advertising.. nobody reads the paper anymore.
Bought one in florida..my repair trips are deducted now Smilie

Sounds like you need to amend your 13, 14 taxes
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Last edited by stufine December 21, 2015 at 04:07 PM
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#5
Quote from glck23 View Post :
Good morning, i bought a 4 unit rental property in 2013, it was short sale, $190,000 loan , property appraised at $438,000 . each unit is $800, total income from property is $3400 (garages are extra) and the mortgage is $1300. i pocket $2100 cash. I have a full time job, making $53,000yr. What is the best way to report rental property income when filing taxes next year (2016)? Will I get taxed heavily? Will reporting this additional income boost my total yearly income to $78,000 , putting me in a different tax bracket? I got $78,000 by adding my full time job salary of $53,000 and the income i got from rental property of $25,200yr.

Thanks!
Spend a couple hundred bucks and go see a tax guy. Problem solved!

You're missing out on a simple thing that could significantly decrease your "income" called depreciation, not to say probably other things as well like property tax, insurance, etc..
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#6
Quote from stufine View Post :
This clown is someone you don't want to do your taxes ^^^^

If he's the owner of said company, who do you think will pay the taxes?

This post has sooooo much stink in it
Do you have anything constructive to add, or are you just here to cast doubt in legitimate ideas?
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#7
Quote from poignant View Post :
Do you have anything constructive to add, or are you just here to cast doubt in legitimate ideas?
1 Explain to me why he would have to pay self-employment tax
2 Explain "A company can buy many things for your business use, including paying part of your rent/mortgage and utilities for the office space you have designated in your house"
3 Explain You can be creative in which ways the company's profits are allocated so that the tax burden is minimized.

1 he wouldn't pay self-employment tax
2 he doesn't need a company to take the home office deduction
3 profit is profit. you need to be creative before it becomes profit

4 define legitimate idea, I haven't seen any

other than to "see a Tax Accountant"
Most likely it wouldn't cost anything. I've seen 2 with 0 cost. Cost is when you file with them

OPs numbers don't add up...if you want to get pissy about it..

His rents are too low for a 438k location
He's claiming every dime he takes in, minus his mortgage.
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Last edited by stufine December 21, 2015 at 04:52 PM
#8
My question is you bought it in 2013 and you're just NOW asking how to report it on your taxes?? Find a good CPA and they'll help you.

You'll report your total rents received and then you're able to deduct your mortgage interest, property taxes paid, insurance paid, any management fees you pay, and any expenses you have (maintenance, repairs), and then you can take depreciation which is determined by a schedule. Your rents received less your expenses is your total income/loss that will either add/subtract from your W-2 income. So yes, it has the potential of increasing your tax bracket, but done properly could reduce your tax liability.
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#9
Read instructions for IRS form Schedule E. Buy a book on owning real estate such as books by NOLO. they have one specifically to address taxes. the book will be deductible as well.
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#10
Quote from stufine View Post :
OPs numbers don't add up...if you want to get pissy about it..

His rents are too low for a 438k location
He's claiming every dime he takes in, minus his mortgage.
When I bought the apartments, all units were occupied, they're all hispanic church goers that take care of the property and previously paid $700/mo, now they pay $750 for the first 3 units, $800 for the 4th unit, the garages are separate, there are 4 garages, each is $150/each , all occupied.

the reason I don't ask for $900-$1000 per unit is because I work full time and live 30 miles from the apartments and dont want to lose the tenants i have now. I have a handyman who handles most of the work whenever theres a plumbing or electrical problem. property is in Los Angeles County, which is rent control.

my numbers are correct about the appraisal. I just finished my refinance with Wells Fargo and got rid of the PMI, which required an appraisal, it appraised at $438k.

I pay water and waste, which is about $280/mo , i didn't report rental income from previous years because i claimed that i was spending most of it on repairs, like paint, remodel, etc...

but now that me and my wife want to buy another home (she has 1 under her name already, and i have the apartments), i have to increase my yearly income, which is why i'm now reporting profit from the apartments.
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#11
Quote from glck23 View Post :
When I bought the apartments, all units were occupied, they're all hispanic church goers that take care of the property and previously paid $700/mo, now they pay $750 for the first 3 units, $800 for the 4th unit, the garages are separate, there are 4 garages, each is $150/each , all occupied.

the reason I don't ask for $900-$1000 per unit is because I work full time and live 30 miles from the apartments and dont want to lose the tenants i have now. I have a handyman who handles most of the work whenever theres a plumbing or electrical problem. property is in Los Angeles County, which is rent control.

my numbers are correct about the appraisal. I just finished my refinance with Wells Fargo and got rid of the PMI, which required an appraisal, it appraised at $438k.

I pay water and waste, which is about $280/mo , i didn't report rental income from previous years because i claimed that i was spending most of it on repairs, like paint, remodel, etc...

but now that me and my wife want to buy another home (she has 1 under her name already, and i have the apartments), i have to increase my yearly income, which is why i'm now reporting profit from the apartments.
I didn't mean to sound like you were faking numbers.. just that the appraisal amount would call for higher rents.

You might want to talk to a CPA.

Boomancini has the best post.

You need to go back and look at the numbers. Everything you do/did will eat away at your TOTAL income

53k w2
25k rent
78k
(7200) interest 150k loan@5%
(2400) insurance
(3600) property taxes
(3200) water/sewer/trash
(5000) depreciation
56,600 TOTAL income reported to IRS

56k before any other deductions for repairs/maintenance
If you have another 10k in work that was done, your TOTAL income would be 46k
you would be taxed at 46k.
Everything you do at that building is deductible. (99% anyway)
garages pocket money?
people side in stuff bought for their main house as rental property use
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#12
Quote from glck23 View Post :
When I bought the apartments, all units were occupied, they're all hispanic church goers that take care of the property and previously paid $700/mo, now they pay $750 for the first 3 units, $800 for the 4th unit, the garages are separate, there are 4 garages, each is $150/each , all occupied.

the reason I don't ask for $900-$1000 per unit is because I work full time and live 30 miles from the apartments and dont want to lose the tenants i have now. I have a handyman who handles most of the work whenever theres a plumbing or electrical problem. property is in Los Angeles County, which is rent control.

my numbers are correct about the appraisal. I just finished my refinance with Wells Fargo and got rid of the PMI, which required an appraisal, it appraised at $438k.

I pay water and waste, which is about $280/mo , i didn't report rental income from previous years because i claimed that i was spending most of it on repairs, like paint, remodel, etc...

but now that me and my wife want to buy another home (she has 1 under her name already, and i have the apartments), i have to increase my yearly income, which is why i'm now reporting profit from the apartments.
Please either read instruction to Sch E carefully or contact CPA/tax preparer.
Bolded art is wrong, you have to do Sch E to report all income/expenses re Rental property. At your AGI you probably had an option to claim same of the rental losses previous years against your ordinary income (W-2).
I strongly suggest talking to professional, and possibly amending 2013-2014 returns.
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#13
Quote from stufine View Post :
I didn't mean to sound like you were faking numbers.. just that the appraisal amount would call for higher rents.

You might want to talk to a CPA.

Boomancini has the best post.

You need to go back and look at the numbers. Everything you do/did will eat away at your TOTAL income

53k w2
25k rent
78k
(7200) interest 150k loan@5%
(2400) insurance
(3600) property taxes
(3200) water/sewer/trash
(5000) depreciation
56,600 TOTAL income reported to IRS

56k before any other deductions for repairs/maintenance
If you have another 10k in work that was done, your TOTAL income would be 46k
you would be taxed at 46k.
Everything you do at that building is deductible. (99% anyway)
garages pocket money?
people side in stuff bought for their main house as rental property use
Boomancini post is correct, yours - not so much. All rental-related income and expenses should be reported on Sch E.
First, OP needs to prepare schedule E (all rental income less all expenses), than the result is added/subtracted from other income. Maintenance is also deducted on Sch E, repairs are a bit more complicated, some might be amortized over certain period of time. Either way - OP needs to spend some time educating himself, or some money to pay professional to do it right.
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#14
Quote from glck23 View Post :
When I bought the apartments, all units were occupied, they're all hispanic church goers that take care of the property and previously paid $700/mo, now they pay $750 for the first 3 units, $800 for the 4th unit, the garages are separate, there are 4 garages, each is $150/each , all occupied.

the reason I don't ask for $900-$1000 per unit is because I work full time and live 30 miles from the apartments and dont want to lose the tenants i have now. I have a handyman who handles most of the work whenever theres a plumbing or electrical problem. property is in Los Angeles County, which is rent control.

my numbers are correct about the appraisal. I just finished my refinance with Wells Fargo and got rid of the PMI, which required an appraisal, it appraised at $438k.

I pay water and waste, which is about $280/mo , i didn't report rental income from previous years because i claimed that i was spending most of it on repairs, like paint, remodel, etc...

but now that me and my wife want to buy another home (she has 1 under her name already, and i have the apartments), i have to increase my yearly income, which is why i'm now reporting profit from the apartments.

When you say you "claimed" usually that means you showed it on your taxes. I'm confused on how you "claimed it." I have three rentals and I claim expenses every year, but if I just claimed expenses with no income that would be a red flag. I'm not saying you can't do that, but the expenses you claim would have been on your schedule E and would have offset any income you made.

From a lenders stand point (it's what I do everyday) I'll be looking at what you show on your schedule E and what flows over to your front page of your 1040. You can add back in the the depreciation for qualifying purposes. To be honest, I would be surprised if a lender didn't require 2 years of taxes showing rental income since you've owned them since 2013. Underwriters are peculiar people like that and will recognize that you are just showing more income for qualifying purposes.
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#15
Quote from Tatka75 View Post :
Boomancini post is correct, yours - not so much. All rental-related income and expenses should be reported on Sch E.
First, OP needs to prepare schedule E (all rental income less all expenses), than the result is added/subtracted from other income. Maintenance is also deducted on Sch E, repairs are a bit more complicated, some might be amortized over certain period of time. Either way - OP needs to spend some time educating himself, or some money to pay professional to do it right.
which part
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