Great summation from the WSJ<\/p>\n
http:\/\/www.wsj.com\/articles\/how-landlords-not-named-trump-can-avoid-paying-taxes-1476465734<\/p>\n
In 2014, one or more filers of 392,000 returns claimed to be real-estate professionals, according the most recent data from the Internal Revenue Service. This total doesn’t include taxpayers earning $150,000 or less and who can deduct up to $25,000 of rental losses under different rules.<\/p>\n
To qualify for this coveted status, real-estate professionals have to meet stringent requirements. For example, they must spend at least 750 hours a year on their rental-real-estate business, and the total hours must be more than half their business activity\u00e2\u20ac\u201dmaking it difficult for someone with a full-time job to qualify. They also have to meet a further layer of detailed requirements.<\/p>\n
Here is a rundown of breaks that often benefit those who are eligible:<\/p>\n
*Depreciation. Shrewd owners select properties that are appreciating while writing off losses that are only on paper because the law assumes the buildings are deteriorating. This annual deduction is based on a life of 39 years for commercial properties and 27 1\/2 years for residential ones. Depreciation is deductible even if the owner borrowed money to buy the building.<\/p>\n
Real-estate buyers often hire specialists to prove that a large part of a building\u00e2\u20ac\u2122s cost\u00e2\u20ac\u201dsometimes more than 60%\u00e2\u20ac\u201dis made up of elements that qualify for much faster write-offs. Experts say this yields larger paper losses sooner.<\/p>\n
\u00e2\u20ac\u0153The benefits are huge,\u00e2\u20ac\u009d says Eve Dreyfuss, a CPA with Moss Adams in Campbell, Calif.<\/p>\n
*Loss deductions. If there are more losses than income from rental properties because of write-offs for depreciation, interest and taxes, real-estate professionals can use them to offset other income from wages or investments.<\/p>\n
On the pages of his 1995 return, for example, Donald Trump claimed $15.8 million of losses from ongoing rental real estate and other activities. This more than offset his $7.4 million of taxable interest income as well as his business income. Unused losses can be carried forward for later use.<\/p>\n
By contrast, taxpayers with capital losses on investments can only use them against capital gains\u00e2\u20ac\u201dnot wages or interest income (above $3,000 a year).<\/p>\n
*Tax deferral. Real-estate owners can defer taxes on the sale of rental properties by exchanging them for others in what\u00e2\u20ac\u2122s known as a \u00e2\u20ac\u0153like-kind\u00e2\u20ac\u009d exchange. If the investor holds successor properties until death, capital-gains taxes are never owed.<\/p>\n
*Other exemptions. If there is net income from rental properties, it isn\u00e2\u20ac\u2122t subject to the 3.8% surtax on net investment income such as interest, dividends and capital gains. The threshold is $250,000 of income for couples and $200,000 for singles. In addition, rental income isn\u00e2\u20ac\u2122t subject to Social Security and Medicare payroll taxes.<\/p>\n","protected":false},"excerpt":{"rendered":"
Great summation from the WSJ http:\/\/www.wsj.com\/articles\/how-landlords-not-named-trump-can-avoid-paying-taxes-1476465734 In 2014, one or more filers of 392,000 returns claimed to be real-estate professionals, according the most recent data from the Internal Revenue Service. This total doesn’t include taxpayers earning $150,000 or less and … Continue reading