Income Commercial Property Taxes

I am going to walk through a brief analysis of the financial house my wife and I bought in January 2007 and was sold in September 2008. The facility is located in Belton, Missouri, a suburb of Kansas City. The property is a three bedroom, two-car garage, split-level home. This is what I consider the "bread and butter"of the home. However, it is the lowest, although not a bad location. We bought the house as a closed bid with the Missouri VA. purchase price was $ 68,900, a down payment and fees were only $ 1,403.

we were able to rent the property for $ 725 a month for the duration of the lease, with the exception of the last month. We received a total of $ 21,750 during the rental period, or about $ 713 a month. In the same period, our costs (taxes, insurance, interest, repairs, supplies, etc.), amounted to $ 15,983, or about $ 524 a month. So, our net cash flow per month was about $ 189 a month for a total of $ 5767th

After fixing it up and rent for more than two years, our tenants could not pay, and we parted ways. Enlisting the services of a local agent, we were able to sell the property in less than 30 days. gross sales price was $ 80,000. If you stop here, as well as some books would you do, you'd think we made ​​a fortune on our initial investment of $ 1.403. But let's throw it in reality. First, I had to pay a real estate agent, a mechanical fix-up costs, taxes and other fees. Our actual sales price is $ 73, 210, and our cash at closing was $ 6,790. However, it is not bad. real appreciation of the home is $ 4.310 ($ 73.210 $ 68.900 minus). Equity As we have diligently paid each month on a mortgage, a small part of it went directly to the repayment of principal. Remember, our sale price was $ 68,900 minus the down payment of $ 700. Our 30 - year loan for $ 68,200. Finally, the actual payment of the mortgage was $ 67,103. Therefore, our capital is $ 1,097.

rental tax game is very interesting. We bought a good "bread and butter" income house is fully aware that it will appreciate in value, but at the end of each year, the IRS has allowed us to break it in a certain period of time (27.5 years) and using certain methods that are approved (changes accelerated cost recovery [MACRs]). Wow, what's the catch here? For one thing, land is not depreciated item, so that only the value of the house can be depreciated. Of course, you are free to come up with land values ​​in relation to property. Any improvements, fixtures, appliances and other items can be depreciated. other catch is that when you sell a property, the government will as his temporary loan back. In other words, you are a property tax on the tax rate declined. During the term of the lease are amortized over a total of $ 5,801 in assets, appliances, etc. The depreciable items, such as an electric range that we bought, were sold as part of the house, and thus the remaining value was reduced to zero, so that these items a small tax loss.

long term capital gains tax was 20 percent (it is now 15 percent), and ordinary income are taxed on my personal tax rates. After running the numbers through my tax program, the entire sale has resulted in the tax burden of $ 1,768. If we take into account the deferred tax saved over 30.5 months ($ 5.801) and multiply my tax rate (28 percent) would result in tax savings of $ 1,624 in the period from owning property. Finally, because I paid $ 1,768 back, I nearly broke even, but lost $ 144. My advice here is to not rely on tax breaks when assessing property. However, after the purchase of real estate to keep all your receipts, keep track of your mileage and try to be as tax efficient as possible. Be prepared for the 15th April, when to sell rental properties.