Lines of credit and taxes

Member since 2021 · 10 posts · 5 votes

If I use lines of credit for a down payment on a apartment complex do I have to pay taxes on my cashflow before I pay back the lines of credit or after?

2 Reply

26 views

Most Popular Reply

Basit SiddiqiBusiness Member

Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes

Cash-flow is not reported on your tax return.
Taxable rental income is.

Taxable rental income normally equals Cash flow + principal paydown - depreciation.

Interest expense on a line of credit used as a down-payment may potentially be an additional expense for you, speak with your CPA.

[email protected]917-280-8544

Basit Siddiqi CPA4.979 Reviews

View Page

1 Reply

See this reply in the discussion

7 Replies

Jump to latestLatest

Sort by

Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
This is a question that's best for your CPA, but I would consider the line of credit payment an operating expense of the property if it was used entirely for that purpose. This is just like a 1st mortgage, a private equity loan, a hard money loan, or any other debt you have on the deal.
That means your taxes would be paid on the cashflow AFTER the line of credit payment was repaid. But again, talk to a CPA. I'm not qualified to give tax advice, just sharing my 2 cents.
0 Reply
Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
4y
Cash-flow is not reported on your tax return.
Taxable rental income is.

Taxable rental income normally equals Cash flow + principal paydown - depreciation.

Interest expense on a line of credit used as a down-payment may potentially be an additional expense for you, speak with your CPA.
[email protected]917-280-8544
Basit Siddiqi CPA4.979 Reviews
View Page
1 Reply
Frank Greg
Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
4y

A certain client was looking for a CPA to review and or compile some financials. Not sure if you are in the market. If you are, send a private message.
0 Reply
Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
4y
@Frank Greg

Thank you for considering me. However, i do not provide attest services(Audit, Review or compilations)
[email protected]917-280-8544
Basit Siddiqi CPA4.979 Reviews
View Page
0 Reply
Frank Greg
Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
4y
@Basit Siddiqi

Thank you for considering me. However, i do not provide attest services(Audit, Review or compilations)

Sorry to hear. Sort of weird especially since your website says you were previously at PriceWaterHouseCoopers... which is essentially an assurance services and public accounting factory.
0 Reply
Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
4y
@Frank Greg

Correct - I worked 4 years at PwC's tax department.
PwC is the largest public accounting firm and their segments are Audit/Assurance, Consulting and Tax.
Professionals normally work in one segment instead of all three.

It is possible to change from one segment to another but again, professionals do not simultaneously work across all the segments.

I wish your client finds the right professional.
[email protected]917-280-8544
Basit Siddiqi CPA4.979 Reviews
View Page
0 Reply
Frank Greg
Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
4y
@Basit Siddiqi

You don't have to attempt to explain or justify your focus. If you've always worked in tax, it can be difficult to pivot into other areas. Most of the assurance services however requires a certain level of command with the various financial statements, various business structures and transaction types and an understanding of the business at a macro level.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.