5 ms·

Government must remove the ability to claim an income loss on the balance sheets of property owners that purposely leave spaces empty. There is no reason to dou

by lr 7y ago

Government must remove the ability to claim an income loss on the balance sheets of property owners that purposely leave spaces empty. There is no reason to double (or more) the rent on a space. They are doing it because maybe someone will pay, and until then, they get to claim the loss of income as a write off on their taxes. If this is not true, then how can property owners, who claim that they need the new rental rate, afford to leave a place empty for a year or more???

eckmLJE 7y ago
Paraphrasing someone below, if you as a property owner had the option to sign a 5y lease at $1,000/mo. with a local business that could fail, or hold out a year or two to sign a 10y lease at $2,500/mo. with a national bank that will pay on time forever, which would you do?
- OzzyB 7y ago
  The OP is pointing out that the property owner also has the ability and incentive to wait by deferring the unrented space as a loss which essentially distorts the "Free Market".
  - lotsofpulp 7y ago
    I can't find anything online that would let commercial property owners do that: https://www.investopedia.com/terms/r/rentalreal-estate-loss-allowance.asp https://www.investopedia.com/terms/r/rentalreal-estate-loss-...
    - OzzyB 7y ago
      I'm not a tax lawyer but I see the link you posted states owners can get a tax deduction for upto $25k a year, which is ~$2k/month which means you can wait for that comfy Bank to come and lease your space. Of course this is based on owners with deep pockets that can benefit from this, and not the rest of us that might actually need that rental income; but like they say, the rich get richer...
      - senordevnyc 7y ago
        Real estate investor here. You can't claim "lost rent" as an expense. The deduction you're referring to allows you to deduct up to $25k per year of actual rental losses against your other income, but only if your income is below $150k / year. In no way is this an incentive to leave your property vacant.
        OzzyB 7y ago
        So, is the OP right or wrong? I'll admit I was intrigued :)
        lotsofpulp 7y ago
        OP is wrong.
  - eckmLJE 7y ago
    The OP is guessing/presuming that this is the case, and asking why else would a property owner leave their space vacant for a year or more. I'm offering an alternative reason.
lotsofpulp 7y ago
> they get to claim the loss of income as a write off on their taxes. This is not true. https://www.investopedia.com/terms/r/rentalreal-estate-loss-allowance.asp https://www.investopedia.com/terms/r/rentalreal-estate-loss-...
- lr 7y ago
  How do you know that the owner of the building that Sparky's was in, would not qualify for this deduction?
  - senordevnyc 7y ago
    That's not the point. Even if they did qualify, you can't claim loss of income as an expense. In other words, you can't say "well, the market rate for this space is $30,000 per year but it was vacant, so I get a $30,000 deduction!". That's not how taxes work, at all. So this isn't an incentive to leaving a space vacant.
dtech 7y ago
That seems like a very weird solution > who claim that they need the new rental rate They don't claim that, they want it (greed) If you want to prevent emptyness, it's better to directly fight that. E.g. say that the government will set a rental rate after 12 months of no renter. That will force property owners to set a fair rent that the market will bear or risk the government setting it at way lower rate.
rb808 7y ago
Do you have a source for that? I've heard it before but not sure whether to believe it.
- senordevnyc 7y ago
  It's completely false. You can't deduct "lost rent" for income you wish you had received but didn't.
nradov 7y ago
That's not how income tax works. You can't claim "loss of income" as a tax write off. However maintenance expenses on a rental property can potentially be written off as a business expense whether it is rented or not.
- thrower123 7y ago
  You do have to have some income to offset - the IRS might let you take a loss on paper for a year or two, but they tend to look at small businesses that never show profits but keep going year after year...
  - rayiner 7y ago
    You have to have some income to offset, but you also need actual costs (money going out the door). Not renting to someone at $5,000 per month isn’t an expense, it’s forgone revenue.
    - senordevnyc 7y ago
      The only typical exception to this is depreciation, but it applies whether the space is vacant or occupied, and is thus irrelevant here.
    - thrower123 7y ago
      There is always heat, electricity, water, maintenance, advertising, insurance, etc, etc.

by lr 7y ago

eckmLJE 7y ago

Paraphrasing someone below, if you as a property owner had the option to sign a 5y lease at $1,000/mo. with a local business that could fail, or hold out a year or two to sign a 10y lease at $2,500/mo. with a national bank that will pay on time forever, which would you do?

OzzyB 7y ago
The OP is pointing out that the property owner also has the ability and incentive to wait by deferring the unrented space as a loss which essentially distorts the "Free Market".
- lotsofpulp 7y ago
  I can't find anything online that would let commercial property owners do that: https://www.investopedia.com/terms/r/rentalreal-estate-loss-allowance.asp https://www.investopedia.com/terms/r/rentalreal-estate-loss-...
  - OzzyB 7y ago
    I'm not a tax lawyer but I see the link you posted states owners can get a tax deduction for upto $25k a year, which is ~$2k/month which means you can wait for that comfy Bank to come and lease your space. Of course this is based on owners with deep pockets that can benefit from this, and not the rest of us that might actually need that rental income; but like they say, the rich get richer...
    - senordevnyc 7y ago
      Real estate investor here. You can't claim "lost rent" as an expense. The deduction you're referring to allows you to deduct up to $25k per year of actual rental losses against your other income, but only if your income is below $150k / year. In no way is this an incentive to leave your property vacant.
      - OzzyB 7y ago
        So, is the OP right or wrong? I'll admit I was intrigued :)
        lotsofpulp 7y ago
        OP is wrong.
- eckmLJE 7y ago
  The OP is guessing/presuming that this is the case, and asking why else would a property owner leave their space vacant for a year or more. I'm offering an alternative reason.

lotsofpulp 7y ago

> they get to claim the loss of income as a write off on their taxes. This is not true. https://www.investopedia.com/terms/r/rentalreal-estate-loss-allowance.asp https://www.investopedia.com/terms/r/rentalreal-estate-loss-...

lr 7y ago
How do you know that the owner of the building that Sparky's was in, would not qualify for this deduction?
- senordevnyc 7y ago
  That's not the point. Even if they did qualify, you can't claim loss of income as an expense. In other words, you can't say "well, the market rate for this space is $30,000 per year but it was vacant, so I get a $30,000 deduction!". That's not how taxes work, at all. So this isn't an incentive to leaving a space vacant.

dtech 7y ago

That seems like a very weird solution > who claim that they need the new rental rate They don't claim that, they want it (greed) If you want to prevent emptyness, it's better to directly fight that. E.g. say that the government will set a rental rate after 12 months of no renter. That will force property owners to set a fair rent that the market will bear or risk the government setting it at way lower rate.

rb808 7y ago

Do you have a source for that? I've heard it before but not sure whether to believe it.

senordevnyc 7y ago
It's completely false. You can't deduct "lost rent" for income you wish you had received but didn't.

nradov 7y ago

That's not how income tax works. You can't claim "loss of income" as a tax write off. However maintenance expenses on a rental property can potentially be written off as a business expense whether it is rented or not.

thrower123 7y ago
You do have to have some income to offset - the IRS might let you take a loss on paper for a year or two, but they tend to look at small businesses that never show profits but keep going year after year...
- rayiner 7y ago
  You have to have some income to offset, but you also need actual costs (money going out the door). Not renting to someone at $5,000 per month isn’t an expense, it’s forgone revenue.
  - senordevnyc 7y ago
    The only typical exception to this is depreciation, but it applies whether the space is vacant or occupied, and is thus irrelevant here.
  - thrower123 7y ago
    There is always heat, electricity, water, maintenance, advertising, insurance, etc, etc.