How to manage taxes on first rental

[Anthony Jones]

I was approved to buy a second house to live in so that I can rent out where I currently live. I am going to try and rent the house I currently live in for $1700 a month and my monthly payment is $1321. I am new and trying to figure out costs for the rental and the biggest question I have is will I have to pay income tax on the rent? I plan on forming and LLC and letting the cash flow build up, so that I can save for future expenses. Any direction or resource would be greatly appreciated!

**the $1321 includes my current escrow account with property tax and homeowners insurance.

[Bill Hampton]

Anthony, 

You will pay taxes on any profit after deducting all expenses. Many investors show a paper loss after all expenses are deducted. 

I recommend hiring an accountant that specializes in real estate taxation to ensure you get every deduction you're entitled to and to reduce your taxes. 

Good luck and let me know if you have any questions.