Skip to content
Tax, SDIRAs & Cost Segregation

User Stats

17
Posts
0
Votes
Dan Earl
  • Moody, AL
0
Votes |
17
Posts

Is it possible to minimize taxes on depreciation recapture?

Dan Earl
  • Moody, AL
Posted Oct 25 2017, 12:31

Let's say you have 1 rental and no other type of income.

Rents after mtg interest, Property taxes and insurance brings income to under 9k and therefore no taxes are owed in this situation. No other expenses for this example.

You then have to include depreciation, but it provides no tax benefit. Depreciation does not create a loss.

This happens year after year for many years.

So in this case depreciation seems to only hurt since it adds up year after year until the property is sold and then you pay taxes on this accumulated depreciation if there is any profit from the sale, but it does nothing to help pay less taxes year after year since income is low anyway whether you include depreciation or not.

Since depreciation is mandatory to include regardless if it helps you or not lower your tax liability, Is there a way to minimize the taxes paid on this depreciation recapture at the time of sale assuming there would be profit?

Trying to find something positive from this scenario.

Insight on this is appreciated and please correct me if I am wrong too.

Thank you. 

Loading replies...