House of the Day: 449 6th Street
If you want a great house in a prime location but need a little extra rental income to pull it off, this new listing at 449 6th Street just might be the ticket. The four-story brownstone is divided up into two duplexes. The listing doesn’t say what one of them would rent for, but we’re…
If you want a great house in a prime location but need a little extra rental income to pull it off, this new listing at 449 6th Street just might be the ticket. The four-story brownstone is divided up into two duplexes. The listing doesn’t say what one of them would rent for, but we’re guessing around $4,500. With rates where they are, that should help cover almost a million bucks of your mortgage. Given the asking price of $2,300,000, that should get you almost halfway there to covering your monthly mortgage nut.
449 6th Street [Corcoran] GMAP P*Shark
So the buyer of this has to pay 2M dollars but can’t deduct the losses unless he makes less than $150,000. Preferably less than $125,000.
2M$ house = less than $125,000 income. Can anyone see a contradiction here?
DIBS;
You are right. I should have said that the accumulated losses are subtracted from your capital gains (not the cost basis), thereby reducing your CG taxes.
This was the situation when I sold my 2 family 5 years ago.
benson, your second paragraph is not correct, at least it was not correct a couple of years ago.
The accumulated loss from Schedule E can actually be taken AGAINST YOUR INCOME when you sell the place.
The capital gain from the reduced cost basis through amortization is still taxed at capital gain rates.
Noki;
Now I know why you support Obama: you don’t understand taxation and finance!! :-b
J/K.
And this is where the discussion of finance and taxation, for Noki, simply turns into the gently honking noises emitted by any adult on the Charlie Brown specials.
Folks;
Per the document that BH provided: the passive loss deduction is phased out between AGI of $100K and $150K. At $150K, it is completely phased out.
All is not lost, however. If you make too much to deduct passive losses from your income, you can deduct them from the cost basis of your home. So, you get a break on the capital gains you will pay when you sell the house.
This is a slightly bum deal for someone with income over $150K, however. A deduction of AGI is at a marginal rate of at least 28%, whereas capital gains tops out at 20%.
Boerumresident –
Yes, of course you can offset passive income with passive expenses. But normally you cannot offset regular income with a passive loss. The EXCEPTION is when you actively participate (such as this situation).
“Exception for Rental Real Estate With Active Participation
If you or your spouse actively participated in a passive rental real estate activity, you can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.”
However, that 25K exception is limited to modified AGI under $150K.
Another IRS pub (#527) to peruse:
http://www.irs.gov/publications/p527/ch03.html#en_US_publink1000219121
Arkady, a nice fabric one on the outside of plastic always looks nice.
I’d guess it’s noise abatement – less walking around in bedrooms.
FWIW, I prefer a fabric curtain on my tub – it’s oversized & I can stretch out in it (I’m undersized) & I hate being enclosed in a bath. But I shower too so I need a curtain.