Can Rental Depreciation Offset Ordinary Income?
Real estate investors benefit from the tax shelter that real estate depreciation provides. Best of all, depreciation is a non-cash flow expense since it doesn’t impact an investor’s bank account. Some investors will have a large depreciation expense during a year, which can create an overall loss for their rental property. When that happens, can the loss be used to offset ordinary income?
How Are REIT Dividends Taxed?
REIT dividends can have a mixture of taxation. This all depends on the specific REIT. Because of these differences, understanding the taxation of REIT dividends can be somewhat complex. In this article, we’ll discuss how REIT dividends might be taxed.
Can You Offset Capital Gains with Losses from Prior Years?
A realized loss during a year can mean a lower tax bill. This loss is generally offset against other gains or income. Some people refer to this as shielding taxable income. However, there are rules on how losses are applied against income. What about losses from previous years? Do the same rules apply? Let’s find out.
What Qualifies for a 1033 Exchange?
Ben Franklin famously wrote that, “in this world, nothing is certain except death and taxes.” While not a certainty, it can be expected that something bad will happen in a part of the country in which you live or hold investment real estate. Tornados, mudslides, floods, wildfires, hurricanes, and other natural disasters have become common seasonal events.
What is Ordinary Income?
Paying taxes on monies received can be confusing. This is because there are various ways in which you might receive funds.
What is Pro Forma in Real Estate?
The Oxford Language Dictionary definition of pro forma is "done or produced as a matter of form" or "a standard document or financial statement.” Similarly, the original Latin meaning is “for the sake of the form.” In contemporary usage, a Pro Forma is a cash flow projection for real estate investments. Pro Formas are typically forward-looking estimates of financial results. Real estate investors rely on the pro forma to analyze potential income and expenses.
Are Stock Dividends Taxed as Ordinary Income?
For many taxpayers, there is a substantial difference in the tax rate they pay for long-term capital gains versus the rate they pay for ordinary income. The tax rates on ordinary income range from 10 percent to 37 percent. In comparison, the rate applied to long-term capital gains income is between 0 and 20 percent. The income taxed at the “ordinary” rate includes salary and wage income, commission, bonuses, rents, royalties, short-term capital gains, interest, and unqualified dividends.
What is a Financial Power of Attorney?
Power of attorney is a legal instrument that allows another person to act on behalf of the individual who granted the power to them. While each state has specific rules governing the designation, in most cases, you can confer it on your selected agent by completing a legal, notarized form. While the documents must be notarized, usually, an attorney is not a necessary part of the process.
Can a Relative Be a 1031 Qualified Intermediary?
The successful execution of a 1031 exchange can allow an investor to defer payment of capital gains taxes. This tactic can help you leverage your investment capital, but to obtain approval from the IRS, you must carefully follow the rules governing the 1031 exchange transaction. If you make a mistake, the IRS may disqualify the exchange, resulting in you having to pay the capital gains taxes immediately.
How Does Depreciation Work When You Sell a Rental Property?
There are many costs involved when selling a rental property. One of those is related to depreciation. Where depreciation giveth, it also taketh away. The IRS will claw back some of the depreciation expense taken during the holding period. This isn’t just a simple number. Some calculations are involved in determining the amount of depreciation that investors must pay back at the time of sale.
