4 ms·

>>you can write off a lot of it on your taxes Can you explain this please? Excuse my ignorance of the US tax system. This sounds like a pretty shitty thing fo

by siquick 10y ago

>>you can write off a lot of it on your taxes Can you explain this please? Excuse my ignorance of the US tax system. This sounds like a pretty shitty thing for the government to allow, giving existing home-owners a huge advantage to build up property portfolios over people not yet orable to get on the ladder. (similar to negative gearing in Australia where I live)

caleblloyd 10y ago
Interest on a mortgage is tax deductible in the USA. According to Wikipedia, in 1913 "the reason for the deduction was that in a nation of small proprietors, it was more difficult to separate business and personal expenses, and so it was simpler to just allow deduction of all interest" https://en.wikipedia.org/wiki/Home_mortgage_interest_deduction https://en.wikipedia.org/wiki/Home_mortgage_interest_deducti...
nibs 10y ago
It is insane, and yes you can "expense" mortgage interest against your taxes, and in the case of a rental, a portion of everything else too. Incentivizes owning houses.
- siquick 10y ago
  (Again excuse any ignorance of the tax laws in the US) In a fair world, this would only be allowed on the first buy-to-let property. Anything above that is just not in the interest of society in general, especially in cities like SF and Sydney that are running out of space to and/or NIMBY behaviour.
  - snowwrestler 10y ago
    Rental properties are essentially just treated like businesses. You invest in a capital asset and take depreciation on it. You pay taxes on earnings, which means you can deduct business expenses from revenue. The detailed reality is a bit more complicated of course (there are rules specific to real estate) but that's the essence.
bogomipz 10y ago
You can write 100% of the interest on your primary or secondary residence in the US. You can not write off the interest on a house that is strictly an income property. http://homeguides.sfgate.com/irs-rules-mortgage-interest-deduction-7356.html http://homeguides.sfgate.com/irs-rules-mortgage-interest-ded... The intention is the incentivize people to own their own home, it is not to incentivize them to build up property portfolios. Indeed that would be perverse. I'm sure you can show a loss on an investment with real estate just like you can with any investment but I think continuing to buy subsequent houses and showing losses on all of them as part of your personal tax returns might raise some flags.
- quesera 10y ago
  > You can not write off the interest on a house that is strictly an income property. That is not correct. The article you posted seems to imply it, but it is absolutely not true. Pure rental property is treated as a business property, and mortgage interest on business properties is an expense that is deducted from rental income before determining tax liability. You can even carry a net loss over to your personal return (subject to some limits). Details in IRS pub527: https://www.irs.gov/publications/p527/ch01.html https://www.irs.gov/publications/p527/ch01.html
  - bogomipz 10y ago
    Oh sorry that sentence was meant to be "you can not write off 100% of the interest that is an income property." For instance if you have bought a property as a pure investment property and the total mortgage + interest is being covered by the tenants monthly rent. You can not then write off that interest at 100% since you are not actually incurring that interest payment yourself correct?
    - gigatexal 10y ago
      Incorrect. Interest expense is a line item that is deducted from the company's tax burden. It's the same with a rental regardless if everything is being covered.
gigatexal 10y ago
You can write off the depreciation of the home on a 29.7 (?) year basis, mortgage interest, most improvements are fully written off if not amortized over time, but I think there's a limit of 25k or so in max real estate losses one can accrue in a tax year. Yes it's a huge advantage. Fair? I don't know. Probably a discussion for another thread.

by siquick 10y ago

caleblloyd 10y ago

Interest on a mortgage is tax deductible in the USA. According to Wikipedia, in 1913 "the reason for the deduction was that in a nation of small proprietors, it was more difficult to separate business and personal expenses, and so it was simpler to just allow deduction of all interest" https://en.wikipedia.org/wiki/Home_mortgage_interest_deduction https://en.wikipedia.org/wiki/Home_mortgage_interest_deducti...

nibs 10y ago

It is insane, and yes you can "expense" mortgage interest against your taxes, and in the case of a rental, a portion of everything else too. Incentivizes owning houses.

siquick 10y ago
(Again excuse any ignorance of the tax laws in the US) In a fair world, this would only be allowed on the first buy-to-let property. Anything above that is just not in the interest of society in general, especially in cities like SF and Sydney that are running out of space to and/or NIMBY behaviour.
- snowwrestler 10y ago
  Rental properties are essentially just treated like businesses. You invest in a capital asset and take depreciation on it. You pay taxes on earnings, which means you can deduct business expenses from revenue. The detailed reality is a bit more complicated of course (there are rules specific to real estate) but that's the essence.

bogomipz 10y ago

You can write 100% of the interest on your primary or secondary residence in the US. You can not write off the interest on a house that is strictly an income property. http://homeguides.sfgate.com/irs-rules-mortgage-interest-deduction-7356.html http://homeguides.sfgate.com/irs-rules-mortgage-interest-ded... The intention is the incentivize people to own their own home, it is not to incentivize them to build up property portfolios. Indeed that would be perverse. I'm sure you can show a loss on an investment with real estate just like you can with any investment but I think continuing to buy subsequent houses and showing losses on all of them as part of your personal tax returns might raise some flags.

quesera 10y ago
> You can not write off the interest on a house that is strictly an income property. That is not correct. The article you posted seems to imply it, but it is absolutely not true. Pure rental property is treated as a business property, and mortgage interest on business properties is an expense that is deducted from rental income before determining tax liability. You can even carry a net loss over to your personal return (subject to some limits). Details in IRS pub527: https://www.irs.gov/publications/p527/ch01.html https://www.irs.gov/publications/p527/ch01.html
- bogomipz 10y ago
  Oh sorry that sentence was meant to be "you can not write off 100% of the interest that is an income property." For instance if you have bought a property as a pure investment property and the total mortgage + interest is being covered by the tenants monthly rent. You can not then write off that interest at 100% since you are not actually incurring that interest payment yourself correct?
  - gigatexal 10y ago
    Incorrect. Interest expense is a line item that is deducted from the company's tax burden. It's the same with a rental regardless if everything is being covered.

gigatexal 10y ago

You can write off the depreciation of the home on a 29.7 (?) year basis, mortgage interest, most improvements are fully written off if not amortized over time, but I think there's a limit of 25k or so in max real estate losses one can accrue in a tax year. Yes it's a huge advantage. Fair? I don't know. Probably a discussion for another thread.