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February 16, 2014 at 2:11 AM #771014February 16, 2014 at 6:03 AM #771016flyerParticipant
There will always be some winners and some losers in every generation, so, even though we can all generalize about the fate of a particular generation, there are always exceptions.
Some of us BB’s will have extraordinary, financially rewarding lives–some won’t. Some Gen Xer’s will have extraordinary, financially rewarding
lives–some won’t, and on and on. That’s the way life is.February 16, 2014 at 6:56 AM #771017EconProfParticipant[quote=skerzz]The majority of W-2 workers that own rental property in California generally will not benefit from depreciation deductions (losses on rental properties). I won’t go into all the specifics, but unless you are a full time real estate professional you won’t be able to offset ordinary income with passive rental losses. There is an exception to this rule based on income limitations — however, those that own rentals in SoCal or the Bay Area are likely making too much money to realize the benefit.[/quote]
Please explain yourself here. A W-2 worker is exactly the taxpayer who can most use the depreciation “expense” that goes with owning rental real estate. While he may have a positive cash flow from rents minus cash expenses, he also gets to deduct depreciation “expense” every year. This lowers the property’s taxable income, maybe even making it negative for tax purposes. The result is lower total taxable income. In fact, the higher his W-2 taxable income, the greater the tax benefit from owning rental properties.February 16, 2014 at 10:40 AM #771023FlyerInHiGuest[quote=flyer]There will always be some winners and some losers in every generation, so, even though we can all generalize about the fate of a particular generation, there are always exceptions.
Some of us BB’s will have extraordinary, financially rewarding lives–some won’t. Some Gen Xer’s will have extraordinary, financially rewarding
lives–some won’t, and on and on. That’s the way life is.[/quote]We are talking about the general demographic trends, not individual cases.
It’s not looking good. Japan will be interesting to watch. The boomers did incredibly well. They saved and own houses free and clear. What about the younger generations?
I believe life can take a different path for the worse because of demographic, economic and political cycles. Of course, there will always be exceptions.
February 16, 2014 at 4:07 PM #771042flyerParticipantUnderstand, FlyerIH, and, I agree it will be interesting, and, perhaps, devastating to some, to experience the way in which the future unfolds.
However, since none of us can turn back time to change whatever damage has or has not been done by or to my generation or future generations, IMO, the most any of us can hope for, is to use our individual resources to take care of ourselves and our families at the highest level possible for as long as possible. That was my point in mentioning the advantage of being the exception.
February 16, 2014 at 4:49 PM #771043flyerParticipant[quote=EconProf][quote=skerzz]The majority of W-2 workers that own rental property in California generally will not benefit from depreciation deductions (losses on rental properties). I won’t go into all the specifics, but unless you are a full time real estate professional you won’t be able to offset ordinary income with passive rental losses. There is an exception to this rule based on income limitations — however, those that own rentals in SoCal or the Bay Area are likely making too much money to realize the benefit.[/quote]
Please explain yourself here. A W-2 worker is exactly the taxpayer who can most use the depreciation “expense” that goes with owning rental real estate. While he may have a positive cash flow from rents minus cash expenses, he also gets to deduct depreciation “expense” every year. This lowers the property’s taxable income, maybe even making it negative for tax purposes. The result is lower total taxable income. In fact, the higher his W-2 taxable income, the greater the tax benefit from owning rental properties.[/quote]Again, +1 EP.
February 16, 2014 at 4:54 PM #771045sdgrrlParticipant[quote=FlyerInHi][quote=flyer]There will always be some winners and some losers in every generation, so, even though we can all generalize about the fate of a particular generation, there are always exceptions.
Some of us BB’s will have extraordinary, financially rewarding lives–some won’t. Some Gen Xer’s will have extraordinary, financially rewarding
lives–some won’t, and on and on. That’s the way life is.[/quote]We are talking about the general demographic trends, not individual cases.
It’s not looking good. Japan will be interesting to watch. The boomers did incredibly well. They saved and own houses free and clear. What about the younger generations?
I believe life can take a different path for the worse because of demographic, economic and political cycles. Of course, there will always be exceptions.[/quote]
Japan is an experiment in motion and the cultural impact between the Boomers and Xers are alarming. I’m sure many of you read about the large percentage of Japanese who have no interest in sex or romantic relationships- the figure was something like 40%. The government is worried as their is a huge elderly generation being supported by a younger workforce who feel little security and aren’t really reproducing.
The X and latter generations saw their parents work the same job for 30 years, slowly earn respect as they aged in the workforce and have a decent life.
Today’s Japanese by and large feel I think more insecure than we do. Their culture puts such emphasis on success that I’m not surprised many become video game obsessed hikikomoris.
It will be interesting watching it unfold.
February 16, 2014 at 5:14 PM #771047FlyerInHiGuest[quote=flyer]
However, since none of us can turn back time to change whatever damage has or has not been done by or to my generation or future generations, IMO, the most any of us can hope for, is to use our individual resources to take care of ourselves and our families at the highest level possible for as long as possible. That was my point in mentioning the advantage of being the exception.[/quote]
I think you have quite accurately observed before that many families are having to move out of San Diego because it’s too expensive
I’m seeing a lot of boomers helping their kids and grand kids with downpayments, etc..
Of course boomers who have good savings and self sufficient offsprings will be fine.
February 16, 2014 at 5:16 PM #771048anParticipant[quote=EconProf][quote=skerzz]The majority of W-2 workers that own rental property in California generally will not benefit from depreciation deductions (losses on rental properties). I won’t go into all the specifics, but unless you are a full time real estate professional you won’t be able to offset ordinary income with passive rental losses. There is an exception to this rule based on income limitations — however, those that own rentals in SoCal or the Bay Area are likely making too much money to realize the benefit.[/quote]
Please explain yourself here. A W-2 worker is exactly the taxpayer who can most use the depreciation “expense” that goes with owning rental real estate. While he may have a positive cash flow from rents minus cash expenses, he also gets to deduct depreciation “expense” every year. This lowers the property’s taxable income, maybe even making it negative for tax purposes. The result is lower total taxable income. In fact, the higher his W-2 taxable income, the greater the tax benefit from owning rental properties.[/quote]skerzz is partially correct. You can benefit from depreciation deduction, just like everyone else, but the amount you can deduct decreases when you make >$150k. After $150k AGI, you can no longer apply passive loss from rental property toward your active W-2 income. So, if you make $145k and have $50k “loss” in investment property, your new AGI would be $95k. However, if you make $155k, you cannot apply the $50k “loss” toward your active W-2 income. Unless you’re a real estate professional.This is another prime example of social engineering. If you’re a couple and one of you make close to $150k, there’s very little reason for the other person to go back to work, especially if you have a few investment properties that net a huge “loss”. It would only make sense for the other spouse to go back to work if the other spouse becomes a real estate agent/broker.
February 16, 2014 at 5:21 PM #771051FlyerInHiGuest[quote=sdgrrl]
Japan is an experiment in motion and the cultural impact between the Boomers and Xers are alarming. I’m sure many of you read about the large percentage of Japanese who have no interest in sex or romantic relationships- the figure was something like 40%. The government is worried as their is a huge elderly generation being supported by a younger workforce who feel little security and aren’t really reproducing.The X and latter generations saw their parents work the same job for 30 years, slowly earn respect as they aged in the workforce and have a decent life.
Today’s Japanese by and large feel I think more insecure than we do. Their culture puts such emphasis on success that I’m not surprised many become video game obsessed hikikomoris.
It will be interesting watching it unfold.[/quote]
Add to that a shrinking population, a political system that is dysfunctional (worse than us), the rise of korea and China.
The people are turning inward, standards of living are declining…. Not a good future.
February 16, 2014 at 8:08 PM #771052EconProfParticipant[quote=AN][quote=EconProf][quote=skerzz]The majority of W-2 workers that own rental property in California generally will not benefit from depreciation deductions (losses on rental properties). I won’t go into all the specifics, but unless you are a full time real estate professional you won’t be able to offset ordinary income with passive rental losses. There is an exception to this rule based on income limitations — however, those that own rentals in SoCal or the Bay Area are likely making too much money to realize the benefit.[/quote]
Please explain yourself here. A W-2 worker is exactly the taxpayer who can most use the depreciation “expense” that goes with owning rental real estate. While he may have a positive cash flow from rents minus cash expenses, he also gets to deduct depreciation “expense” every year. This lowers the property’s taxable income, maybe even making it negative for tax purposes. The result is lower total taxable income. In fact, the higher his W-2 taxable income, the greater the tax benefit from owning rental properties.[/quote]skerzz is partially correct. You can benefit from depreciation deduction, just like everyone else, but the amount you can deduct decreases when you make >$150k. After $150k AGI, you can no longer apply passive loss from rental property toward your active W-2 income. So, if you make $145k and have $50k “loss” in investment property, your new AGI would be $95k. However, if you make $155k, you cannot apply the $50k “loss” toward your active W-2 income. Unless you’re a real estate professional.This is another prime example of social engineering. If you’re a couple and one of you make close to $150k, there’s very little reason for the other person to go back to work, especially if you have a few investment properties that net a huge “loss”. It would only make sense for the other spouse to go back to work if the other spouse becomes a real estate agent/broker.[/quote]
Good clarification AN. For the really higher income taxpayer, a whole lot of benefits and deductions start to be phased out as one’s income rises. My post above applies more to middle and upper middle income class taxpayers.February 16, 2014 at 8:37 PM #771054CoronitaParticipant.
February 16, 2014 at 8:37 PM #771055CoronitaParticipant[quote=AN][quote=EconProf][quote=skerzz]The majority of W-2 workers that own rental property in California generally will not benefit from depreciation deductions (losses on rental properties). I won’t go into all the specifics, but unless you are a full time real estate professional you won’t be able to offset ordinary income with passive rental losses. There is an exception to this rule based on income limitations — however, those that own rentals in SoCal or the Bay Area are likely making too much money to realize the benefit.[/quote]
Please explain yourself here. A W-2 worker is exactly the taxpayer who can most use the depreciation “expense” that goes with owning rental real estate. While he may have a positive cash flow from rents minus cash expenses, he also gets to deduct depreciation “expense” every year. This lowers the property’s taxable income, maybe even making it negative for tax purposes. The result is lower total taxable income. In fact, the higher his W-2 taxable income, the greater the tax benefit from owning rental properties.[/quote]skerzz is partially correct. You can benefit from depreciation deduction, just like everyone else, but the amount you can deduct decreases when you make >$150k. After $150k AGI, you can no longer apply passive loss from rental property toward your active W-2 income. So, if you make $145k and have $50k “loss” in investment property, your new AGI would be $95k. However, if you make $155k, you cannot apply the $50k “loss” toward your active W-2 income. Unless you’re a real estate professional.This is another prime example of social engineering. If you’re a couple and one of you make close to $150k, there’s very little reason for the other person to go back to work, especially if you have a few investment properties that net a huge “loss”. It would only make sense for the other spouse to go back to work if the other spouse becomes a real estate agent/broker.[/quote]
Bingo..
February 16, 2014 at 8:40 PM #771053CoronitaParticipant[quote=skerzz]The majority of W-2 workers that own rental property in California generally will not benefit from depreciation deductions (losses on rental properties). I won’t go into all the specifics, but unless you are a full time real estate professional you won’t be able to offset ordinary income with passive rental losses. There is an exception to this rule based on income limitations — however, those that own rentals in SoCal or the Bay Area are likely making too much money to realize the benefit.[/quote]
Ding ding ding…..
BUT, I think it does mean you can almost get into a situation in which your effective rental income is $0/year at least on paper in the short/mid term until you actually need to deal with it… It does end up coming back and biting your eventually.. but hopefully by that time, you have little/no W2 income so you’re in a lower bracket at that point and/or you’re dead by then. Or you keep rolling and rolling it over…
At least that’s my plan (hopefully not the dead part)…
February 17, 2014 at 5:37 AM #771057flyerParticipantSince we’re talking tax deductions here, it seems our film investment deductions have always trumped our rental deductions by a long shot.
One such film investment deduction that we’ve used for several years expired at the end of 2013, but we’ve been able to use a “grandfather clause” (lasting 44 years) to protect this deduction on future projects, as long as we made sure certain requirements had been met by the end of 2013.
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