How much taxes do I need to pay on my single family rental?
Hello friends, I am just starting out as a rental property investor. I recently bought my second property as a primary residence and rented out the first one. The house I am renting out has PITI of 2700 and I rented it out for 3000 per month. So how much taxes will I have to pay at the end of the year, and what strategies can I apply to pay as low as possible?
Beginner investor here, would love to get your guidance on my investor journey. Thanks!
Quote from @Anup Dhakal:
Hello friends, I am just starting out as a rental property investor. I recently bought my second property as a primary residence and rented out the first one. The house I am renting out has PITI of 2700 and I rented it out for 3000 per month. So how much taxes will I have to pay at the end of the year, and what strategies can I apply to pay as low as possible?
Beginner investor here, would love to get your guidance on my investor journey. Thanks!
Call your accountant, NOT the place to get tax advice , but I would pay zero based on 300 bux a month ,
Quote from @Anup Dhakal:
It depends on your deductions, what tax bracket you end up in, etc.
It's only $3,600. Even in the 24% bracket you would only pay $864.
That’s a CPA question and “it depends” is my standard answer as a CPA. Because everyone’s situation is different, it's impossible to provide an answer without looking at your entire tax picture.
Couple of variables off the top of my head, and that is the start of a long list:
- How are you taking depreciation? Standard, cost segregation, bonus?
- What is your personal tax liability and where does that put your tax bracket at?
- How is the entity held? Trust, personal, S-Corp, ect?
- What other revenue streams do you have?
- Do you qualify as a RE professional?
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Real Estate Agent Washington (#129777)
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@Anup Dhakal if you play your cards right, you'll not pay taxes on the little revenue you'll have from your rental. If you learn to play the whole game right, you'll not only not pay taxes on rentals, you'll be able to shift deductions to your other income side.
Start by reading this book, so you can know what you can deduct and how to track/document it ahead of time, so you can provide the right info to your CPA at tax time: Every Landlord's Tax Deduction Guide.
And while at it, since you are a landlord now and property manager (or manager of the property manager), read this so you get a head start on protecting your assets: Every Landlord's Property Protection Guide: 10 Ways to Cut Your Risk Now
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Depreciation and other expenses should offset most of any tax liability
You likely won't pay any taxes after factoring in depreciation.
PITI is Principal Interest Taxes Insurance
It doesn't include depreciation, repairs, renovations, and other expenses that you will incur.
I would expect that your rental will operate at a tax loss which means no additional tax burden.
There might be a chance that it lowers your tax burden.
best of luck