Rental income benefits

1 Reply

I have lived in my home for 10 years, now i am planning to move to bigger home and rent the present one.

I understand that if I sell the home within the next 3 years, there will no be no capital gains tax, I made a profit of 200k.

if i rent my home for 3k/month, I get 36k per year, my deductions will be :

depreciation of 10k, mortgage interest of 10k and property tax of 10k

so I am getting a net profit of 6k/year and other reductions in my gross income. how is this a good deal? and the dep recapture of 25%, at the time of selling also offsets the profit i make. 1031 also doesn't make sense unless it is passed on to my heir.

how do other landlords feel renting is a good source of income. What tax strategies do you use ?

I’ll battle both sides for you:

You’re taxable net profit is $6k, but your in the pocket net profit is $16k, almost 3 times as much. 


With property tax of $10k and a gain of $200k this property must be worth at least $600k. That means you’re making less than 1 or 3% (depending on your point of view.) with zero repairs, maintenance, fees, vacancy, etc... Nobody in their right mid would buy this property to rent it out, so nobody should keep it to rent out. The only exception would be if you planned to move back into it in the future and you’re basically just parking it. 

If you aren’t moving back in to it, sell, sell fast, sell now. Move on and do something else, it’s rare the government lets you keep $200k in income without taxing it.