Tax write off

3 Replies

if a property is quit claimed to me do I get the tax write off benifits when I fill my taxes?

thanks Ned,

It will be an investment property, my mother gave me title to, it has a small loan balance that will stay in her name.

While you may think there are tax benefits, they may not actually be there.  You get to deduct the amount of property taxes you pay but only if you itemize deductions.  To get the property tax deduction, you have to pay the taxes.  Your out of pocket expense will be greater than the tax savings, so, you will be net out of pocket after taxes.  Unless you take over the loan payments, you do not get an investment interest deduction on Schedule A.  If you do take over the loan payments, you can take an investment interest deduction on Schedule A (if you itemize), but again, your out of pocket expense will be greater than the tax savings.  

Additionally, you are getting the property at your mother's cost basis.  This means that when you sell the property, the difference between your net sale proceeds and your mother's cost basis is your taxable capital gain.  If your mother only paid $10K for the property and you sell it for $100K, you will have a taxable capital gain of $90K.  Because the tax hit is less than your profit, you do get to put some money in your pocket after taxes, but not quite as much as you might have expected.  

If, instead of holding this property for investment (long term appreciation), you put it in service as a rental for the production of income, the tax implications get more favorable. After deducting rental operation and property ownership expenses against rental income on Schedule E, you can also take a depreciation expense.  It may be possible to have a net positive cash flow from a rental property, yet show a tax loss on your tax return.  This is the real tax benefit that you may be alluding to.

Consult your own tax preparer or CPA for detailed guidance as it relates to your specific circumstances.

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