What legal steps you can take to reduce your taxes?

[waiting for bottom]

[quote=DataAgent]1. Have a non-working spouse start a home-based business. Most businesses show taxable losses the first few years.
2. Buy a rental property. Even if you break-even with your cash flow, you can still depreciate the property creating a taxable loss.

[/quote]

Careful on the rental property. If you have more than $150K of AGI – no write off for you!

[DataAgent]

There’s always an exception. But as a general rule self-employment and rental property allow for lots of nice tax deductions. To the OP… buy some time with a good tax accountant to create a strategy for your unique tax-minimization case.

[DataAgent]

There’s always an exception. But as a general rule self-employment and rental property allow for lots of nice tax deductions. To the OP… buy some time with a good tax accountant to create a strategy for your unique tax-minimization case.

[DataAgent]

There’s always an exception. But as a general rule self-employment and rental property allow for lots of nice tax deductions. To the OP… buy some time with a good tax accountant to create a strategy for your unique tax-minimization case.

[DataAgent]

There’s always an exception. But as a general rule self-employment and rental property allow for lots of nice tax deductions. To the OP… buy some time with a good tax accountant to create a strategy for your unique tax-minimization case.

[DataAgent]

There’s always an exception. But as a general rule self-employment and rental property allow for lots of nice tax deductions. To the OP… buy some time with a good tax accountant to create a strategy for your unique tax-minimization case.

[(former)FormerSanDiegan]

The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

Regarding rental property …
You can use any amount of rental property loss against passive (e.g. rental) income. However, there are limits when applying it towards regular (e.g. wage or investment) income.
Unless you are a real estate professional, the tax loss on rental property is limited to 25K per year taken against ordinary income. Once you make above 100K this amount is reduced $1 for every $2 you make and is thus eliminated at 150K (as waitingforbottom said).
If you make over this amount the tax loss is carried forward (tax loss carryover) until you either count it against rental property income or sell the property and count it against capital gains.

Tax loss on rental property has two components:
1. Actual losses (which are bad because this is negative cash flow).
2. Losses due to depreciation (Generally better since this is a “phantom” loss valued at about 3.6% of the value of your structure each year).

I would not buy rental property for the tax benefits. Buy for cash flow, appreciation or principal pay down (renter pays for your house over time). Consider the tax benefits a bonus. For example, if you make over 150K you can build up a large carryover loss in the early years. As the property seasons and cash flows better in the future (assuming rents increase at some point or the property is paid off) the income stream can be tax-free, because the carried-over tax loss can be counted against rental income *

* Disclaimer – I am not a lawyer or an accountant, but have prepared my own taxes for rental property owned over the past decade.

[(former)FormerSanDiegan]

The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

Regarding rental property …
You can use any amount of rental property loss against passive (e.g. rental) income. However, there are limits when applying it towards regular (e.g. wage or investment) income.
Unless you are a real estate professional, the tax loss on rental property is limited to 25K per year taken against ordinary income. Once you make above 100K this amount is reduced $1 for every $2 you make and is thus eliminated at 150K (as waitingforbottom said).
If you make over this amount the tax loss is carried forward (tax loss carryover) until you either count it against rental property income or sell the property and count it against capital gains.

Tax loss on rental property has two components:
1. Actual losses (which are bad because this is negative cash flow).
2. Losses due to depreciation (Generally better since this is a “phantom” loss valued at about 3.6% of the value of your structure each year).

I would not buy rental property for the tax benefits. Buy for cash flow, appreciation or principal pay down (renter pays for your house over time). Consider the tax benefits a bonus. For example, if you make over 150K you can build up a large carryover loss in the early years. As the property seasons and cash flows better in the future (assuming rents increase at some point or the property is paid off) the income stream can be tax-free, because the carried-over tax loss can be counted against rental income *

* Disclaimer – I am not a lawyer or an accountant, but have prepared my own taxes for rental property owned over the past decade.

[(former)FormerSanDiegan]

The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

Regarding rental property …
You can use any amount of rental property loss against passive (e.g. rental) income. However, there are limits when applying it towards regular (e.g. wage or investment) income.
Unless you are a real estate professional, the tax loss on rental property is limited to 25K per year taken against ordinary income. Once you make above 100K this amount is reduced $1 for every $2 you make and is thus eliminated at 150K (as waitingforbottom said).
If you make over this amount the tax loss is carried forward (tax loss carryover) until you either count it against rental property income or sell the property and count it against capital gains.

Tax loss on rental property has two components:
1. Actual losses (which are bad because this is negative cash flow).
2. Losses due to depreciation (Generally better since this is a “phantom” loss valued at about 3.6% of the value of your structure each year).

I would not buy rental property for the tax benefits. Buy for cash flow, appreciation or principal pay down (renter pays for your house over time). Consider the tax benefits a bonus. For example, if you make over 150K you can build up a large carryover loss in the early years. As the property seasons and cash flows better in the future (assuming rents increase at some point or the property is paid off) the income stream can be tax-free, because the carried-over tax loss can be counted against rental income *

* Disclaimer – I am not a lawyer or an accountant, but have prepared my own taxes for rental property owned over the past decade.

[(former)FormerSanDiegan]

The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

Regarding rental property …
You can use any amount of rental property loss against passive (e.g. rental) income. However, there are limits when applying it towards regular (e.g. wage or investment) income.
Unless you are a real estate professional, the tax loss on rental property is limited to 25K per year taken against ordinary income. Once you make above 100K this amount is reduced $1 for every $2 you make and is thus eliminated at 150K (as waitingforbottom said).
If you make over this amount the tax loss is carried forward (tax loss carryover) until you either count it against rental property income or sell the property and count it against capital gains.

Tax loss on rental property has two components:
1. Actual losses (which are bad because this is negative cash flow).
2. Losses due to depreciation (Generally better since this is a “phantom” loss valued at about 3.6% of the value of your structure each year).

I would not buy rental property for the tax benefits. Buy for cash flow, appreciation or principal pay down (renter pays for your house over time). Consider the tax benefits a bonus. For example, if you make over 150K you can build up a large carryover loss in the early years. As the property seasons and cash flows better in the future (assuming rents increase at some point or the property is paid off) the income stream can be tax-free, because the carried-over tax loss can be counted against rental income *

* Disclaimer – I am not a lawyer or an accountant, but have prepared my own taxes for rental property owned over the past decade.

[(former)FormerSanDiegan]

The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

Regarding rental property …
You can use any amount of rental property loss against passive (e.g. rental) income. However, there are limits when applying it towards regular (e.g. wage or investment) income.
Unless you are a real estate professional, the tax loss on rental property is limited to 25K per year taken against ordinary income. Once you make above 100K this amount is reduced $1 for every $2 you make and is thus eliminated at 150K (as waitingforbottom said).
If you make over this amount the tax loss is carried forward (tax loss carryover) until you either count it against rental property income or sell the property and count it against capital gains.

Tax loss on rental property has two components:
1. Actual losses (which are bad because this is negative cash flow).
2. Losses due to depreciation (Generally better since this is a “phantom” loss valued at about 3.6% of the value of your structure each year).

I would not buy rental property for the tax benefits. Buy for cash flow, appreciation or principal pay down (renter pays for your house over time). Consider the tax benefits a bonus. For example, if you make over 150K you can build up a large carryover loss in the early years. As the property seasons and cash flows better in the future (assuming rents increase at some point or the property is paid off) the income stream can be tax-free, because the carried-over tax loss can be counted against rental income *

* Disclaimer – I am not a lawyer or an accountant, but have prepared my own taxes for rental property owned over the past decade.

[Coronita]

[quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

[/quote]

Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…

Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).

Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..

[Coronita]

[quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

[/quote]

Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…

Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).

Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..

[Coronita]

[quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

[/quote]

Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…

Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).

Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..

[Coronita]

[quote=FormerSanDiegan]The #1 legal tax break is write-off of interest of your first mortgage. Of course, getting that requires you to leverage real estate which has been a losing proposition the last few years.

[/quote]

Unfortunately, this itemized deduction I believe also starts getting reduced above certain income levels…

Also, there is a point in which you end up paying AMT….and some itemized deductions won’t count toward AMT (property tax and income tax deductions aren’t part of AMT calculation, for instance).

Ironically, experimenting with my tax software, I think mortgage interest payments are still deductions when computing AMT…..

[Author]

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