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Home >> Stock Forums >> Tax Shelters/Depreciating Rentals

Tax Shelters/Depreciating Rentals

aprilwms said: "Does anyone know if I can depreciate my rentals to offset income and by how much? (100%?) How many years until it's fully depreciated and then should I sale/trade for new rentals? What if I buy 10 rentals in the same condition, the same year, can I depreciate them at the same rate/time? Is this a legal and typical practice? Can anyone help me understand Passive Activity Loss and when they ARE and ARE NOT allowed. I have a million more questions, but I think I burnt up my time! Thank you for your help, April"

Kloewer said: "Investment property is depreciated over 27 1/2 years. This is a huge tax advantage over buying a home to live in. And unlike the tax deductions for paying mortgage interest, this is sort of a freebie because (hopefully) your investment property will be appreciating in value as you write it off over the years. You get to depreciate the value of the structure only (not the land it sits on), so you'll want to get a professional appraisal before you buy. On top of the initial value of the property, you also get to depreciate any improvements you make, like remodeling a kitchen, putting on a new roof, etc. Repairs, on the other hand, are deducted in the current tax year. I don't think there's a cap on the number of properties you can depreciate at one time. But if you're in that position (with 10 properties), you should be using a CPA or tax attorney anyway. As I understand passive activity income in regards to investment property, it would apply if you invest in a property without having an active role managing it. I manage my own property, but if I were to use a professional property manager, it would still be active income as long I was involved in setting the rental rates, choosing from candidate applications, etc. At least that's the way I've understood the rule. There's an easy-to-read, invaluable book I'll recommend if you're thinking of getting started in real estate investing. It's called "Rental Houses for the Successful Small Investor" by Suzanne Thomas. It will probably answer many of your questions."

aprilwms said: "Thank you Kloewer for taking the time to answer my questions. I will get that book. ~April"

jolllyroger said: "Find a good tax man. What I mean by a good tax man is a CPA that owns properties, preferably more properties than you own. He can help you set up 2 or more LLC's that are under the umbrella of an S corp. At the end of the tax year you can roll profits from one LLC into the next defering your taxes. The next year you roll again ...etc. Get a real good CPA they should be able to save you more than their fees are. Why does everyone try to do all the details themselves to save a few pennies. You always see people steping over the big bucks to save a few pennies."