Skip to content
×
Pro Members Get Full Access
Succeed in real estate investing with proven toolkits that have helped thousands of aspiring and existing investors achieve financial freedom.
$0 TODAY
$32.50/month, billed annually after your 7-day trial.
Cancel anytime
Find the right properties and ace your analysis
Market Finder with key investor metrics for all US markets, plus a list of recommended markets.
Deal Finder with investor-focused filters and notifications for new properties
Unlimited access to 9+ rental analysis calculators and rent estimator tools
Off-market deal finding software from Invelo ($638 value)
Supercharge your network
Pro profile badge
Pro exclusive community forums and threads
Build your landlord command center
All-in-one property management software from RentRedi ($240 value)
Portfolio monitoring and accounting from Stessa
Lawyer-approved lease agreement packages for all 50-states ($4,950 value) *annual subscribers only
Shortcut the learning curve
Live Q&A sessions with experts
Webinar replay archive
50% off investing courses ($290 value)
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Buying & Selling Real Estate
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

User Stats

4
Posts
0
Votes
Brian Reese
  • Investor
  • Boulder, CO
0
Votes |
4
Posts

sell now or rent : tax consequences of renting when MAGI > 150K

Brian Reese
  • Investor
  • Boulder, CO
Posted Jul 6 2015, 23:28

I have a condo, purchased 2012 that I have currently on the market. Comparables and recent sales put a FMV between 370K-380K. However I am sensing a change in market activity. While May/June there was a flurry of bidding activity in my area, it has slowed down in July. Condo is priced at 375K and is getting no offers.

I have also recently bought a house, so keeping 2 mortgages active isn't in my best interest. I am quite confident that I will find a buyer at 375K but need to wait . My options are:

1. keep price at 375K and wait

2. drop price to 370K or even 365K (lower than what similar units sold in May'15) to attract buyers but TBD. Not my preferred option.

3. rent

I started a hypothetical rental scenario for tax purposes. I got stuck at the 'Gain or Loss Worksheet' line b :

"Any depreciation you took — or didn't take but could have taken — for any business

or investment (rental) use of your home other than home office use"

So I did Schedule E and Form 8582 and using some ballpark numbers I quickly realized that :

since my MAGI > 150K, I won't be able to take any passive loss deductions on my 1040. 

This means that any depreciation allowable won't help reduce my tax for the given year. 

Question : but does it mean that I still need to pay for depreciation recapture when I sell the condo ? the answer can affect my decision to sell at a lower price or rent it for a year and then sell

-- some numbers to boil it down

Purchase price : 300K

FMV @ time of rental : 375K

Sale in 2016 after 1 year of rental (say) : 375K

Depreciation allowable : 10K

Allowable loss in Schedule E : 0 (b/c of MAGI exclusions)

Profit = 375K - 300K - 5K (closing costs) - 10K (depreciation) = 60K

Depreciation recapture tax = 25% of 10K = 2500

 --- is this correct math ? I think there is something odd by paying a depreciation recapture tax when I did not get any benefits of depreciation b/c of my MAGI exclusions.

thanks

-Brian

Loading replies...