[quote=cvrentguy] Beyond that, I will
remain optimistic that our friends in DC would not put a pitchfork into mortgage
interest deduction for rental properties as part of tax code reform. [/quote]
My guess after reading the talking heads from the right and the left is that mortgage interest deduction for homeowners might go away/scaled back because it is alleged that it is “wasteful subsidy” to “non-poor” which “distorts the housing market”.
No one, however, is proposing to eliminate the practice of writing off mortgage interest (and other expenses) for rental properties on schedule-E, because doing so would hurt “job creators”!
[quote=flu]
Once you start doing stuff on a schedule E, you have other deductions you can take though.. One being depreciation. And other things like cost,etc… So while you might have a positive cash flow, on paper it probably ends up being 0 or negative gain. I’m pretty sure if you can i f youcash flow this with +$500, you can pretty much write it all off as $0 net income on paper, at least for the first couple of years…At least it’s not effectively going to be 30%.
[/quote]
Depreciation sounds sweet but it is like delayed punishment. By claiming depreciation every year you may reduce your taxes for that year. But when you sell, all that depreciation needs to be recaptured at 25% rate in one go. So it is like party today and pay tomorrow 😉
There are ways to avoid depreciation recapture. You could avoid it by buying another property in 1031-exchange. Or you can choose to die and your heirs would inherit it at stepped up basis. But all that guarantees that you will be in pigglording business for life!
