|
Also remember: you as the property owner can deduct from your income tax the property taxes on your rental properties. So let's play with this for a minute:
GI Joe is married to GI Elizabeth, and their first duty station in 1991 was Fort Lewis. They bought a home and were able to deduct their interest and property taxes.
When they moved to Fort Riley in 1997, they listed their Fort Lewis home with a rental agent, and bought a home in Manhattan, Kansas. Now they can deduct the taxes they pay on the Ft. Lewis house--PLUS they can deduct insurance payments as a business expense, which they couldn't do when they were living in it. They have to report the rent payments as income, but then again they had to report the money they used to pay the mortgage when they lived in the house as income so it's no skin off their backs. They can also deduct repairs, which they couldn't do as the residents of the property. Plus I think you can deduct agency fees--if you're paying Johnson Realty $50 a month to collect your rent and look at the house once in a while to be sure the tenant hasn't set up a meth lab in the garage, you can deduct it as an ordinary and necessary expense.
Now here's the real kicker: Rental property is business property, correct? This puts it on Schedule C, not Schedule A. They can deduct the insurance on the place on line 15, the mortgage interest on line 16a and the taxes on line 23. they can put the rental agency fees on line 10, any travel to Fort Lewis they have to do on line 24a, if they're paying utilities (not likely unless they evict the last tenant and pay to keep the lights on so the AC can run) they can go on line 25. This they can do without regard to their standard deduction, because as long as that place is being rented out it's a business venture. Same deal when they move to Fort Gordon and rent the Fort Riley property out because the last one worked so well.
As far as your personal residence goes, the only way you can deduct your property taxes and interest payments is if your total itemizable expenses break the $11,400 standard deduction.
So...who's paying the property tax for a renter? Most of it is paid by the IRS.
|