Principal portion of the mortgage on a Buy and Hold investment
Hello BP Community,
I am new to all of this and I am still in the learning phase of REI. Been reading a lot (rich dad poor dad, etc.) and listening to the Podcasts to try to find which niche would be a good fit for me to start in. Anyways, regarding Buy and Hold I had a question from a tax perspective.
Here are my assumptions:
- You own a single family or a multi family investment and you are currently generating minimal cash flow. Let's assume you are generating $100 a month after all expenses.
- Every month the mortgage you have on the property is being covered by the rent you are collecting.
So here is my question.
- From a tax perspective, correct me if I am wrong, but isn't the Principal (portion of the mortgage payment) that is being paid (by the rent being collected) considered as taxable income?
- Is your end of year taxable income on this project the $100 a month (assumed cashflow) plus the principal portion of the mortgage that was paid down throughout the year?
- Are there any strategies that can limit or minimize that tax liability?
Thanks for all your help. This community is great.