Question on Taxes for my Rental

5 Replies


I am a new member here as well as a new investor in the real estate business. I was wondering if someone could explain the tax advantages that I get by renting out a property.

I have a property that is actually 2 houses that is on one lot. I live in one of them and I rent out the house in back of me.

I was doing some research from the " Real Estate Investing" by the McGraw-Hill book and it said " Because real estate often provides a tax buffer between regular income (such as income from your job) and your real estate investment income due to depreciation, it is likely that some if not ALL of the cash flow from real estate investments will be TAX FREE"

I have been reporting the income to my tax consultant every year but should I be doing something different and do I really get a different "tax break" because of the income that I am getting?

Any information would be appreciated.

btw...I also owe money on the property if that should make a difference in some way.


Dave Wolfe

I would check with your accountant to know for sure, but I will give you my take.

I am in a similar situation.  I live in a duplex and rent out the 2nd unit.  After deducting the expenses (including mortgage interest, taxes, insurance, and utilities) from the revenue I had almost no income.  Then you can deduct appreciation, which in my case was around $16000.  

So there is potentially a huge tax write off you are missing out on.

Strainght from the IRS

You deduct DEpreciation (of the building you're renting out, not of the land nor of the building [or portion] that you're using personally).

APpreciation is the change in value of the asset over time. DEpreciation is the credit allowed for the theory that buildings don't last forever and is the financial credit you get for the"wear" on the building while in service creating a rental income stream. If @Dave Wolfe 's tax consultant isn't doing this at all, ask him for an explanation and unless it's amazing (that you have a unique situation that precludes it), fire him and get someone who knows what they're doing.

Look on line 18 of schedule E for a quick check.

Hi Jim,

Thanks for the response and I will check into it....

Thank you for your time.

Dave Wolfe

Income from rentals is not subject to Social Security or Medicare taxes. That saves you over 15% right there.

Hi Justin and Sylvia,

Thank you so much for your input and time with answering my question...I will surely look in more depth with this and get with my accountant this week.

Sincerely :)

Dave Wolfe

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