Am I thinking about the tax benefits of renting real estate correctly?
Question on rental income taxation:
Thank you in advance if you can clarify if I am thinking about this right or not... -Assume I own a rental property in my LLC. -The property earns 2,000 in net rental income after paying mortgage/Maintenance/insurance/taxes/mgmt fees. -The total sum of the maintenance/insurance/taxes/mgmt fees is 5,000. The total mortgage interest paid on the loan for the year is 1,000. So total tax deductions are 6,000 for the year.
-My tax marginal tax on earned income is 46.7%
-At the end of the year I have 2,000 in actual rent income offset by 6,000 in tax deductions. According to the IRS, I have lost (4,000) on renting the property.
My question...
-Is this loss carried over against other earned income for the year?
If it is carried against other income...
-In trying to compute my return on the investment, is it correct to say:
Thank you in advance if you can clarify if I am thinking about this right or not... -Assume I own a rental property in my LLC. -The property earns 2,000 in net rental income after paying mortgage/Maintenance/insurance/taxes/mgmt fees. -The total sum of the maintenance/insurance/taxes/mgmt fees is 5,000. The total mortgage interest paid on the loan for the year is 1,000. So total tax deductions are 6,000 for the year.
-My tax marginal tax on earned income is 46.7%
-At the end of the year I have 2,000 in actual rent income offset by 6,000 in tax deductions. According to the IRS, I have lost (4,000) on renting the property.
My question...
-Is this loss carried over against other earned income for the year?
If it is carried against other income...
-In trying to compute my return on the investment, is it correct to say:
I earned 2,000 in rental income for the year, which is taxed at 46.7%. So I net earned 1,066 for the year. Plus I had 6,000 in tax deductions for the year, which saved me 2,802 in tax dollars. So my actual return on this investment is 3,868 (1,066+2,802).