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Your friend will have to repay those taxes when he sells (assuming there is profit above the then-depreciated value). Seems like a lot of people don't know this
by stanleydrew 8y ago
Your friend will have to repay those taxes when he sells (assuming there is profit above the then-depreciated value). Seems like a lot of people don't know this.
Yes it is true that the tax rate is capped at 25% (which is sometimes less than the normal marginal federal rate you would pay) and there are ways to defer the tax bill further but it's not just like free money that the government gives up on collecting from you.
- TomVDB 8y agoIf he sells. We have a bunch of rentals around here and we have no plans at all to ever sell. And when we die the tax basis for our kids will be the value of the properties at our time of death. (And I think they can even start using depreciation again.)
- stanleydrew 8y agoAgreed, the step up in tax basis at time of inheritance is really the problem with that though. Which is a problem regardless of depreciation. The new tax law that was passed I thought might eliminate that loophole, but the proposal was nixed in the final bill.
- amanaplanacanal 8y agoA lot of the simplification and rationalization that was the initial selling point for the tax bill somehow got traded in for large tax decreases for the wealthiest before it was signed. In my generous moments I think that they really did intend simplification and were simply bowled over by the other interests. In my less generous moments I notice that they keep saying that they are doing A, and instead do B. Again and again.
- gamechangr 8y agoHe will do a 1031 exchange and keep on saving for another 20 years.