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Started By
Message
Could you help me understand taxes and my rental property?
Posted on 3/11/16 at 9:38 am
Posted on 3/11/16 at 9:38 am
I don't think I'll provide enough info here for you, so whatever I'm leaving out, ask for and I'll post it some time today.
I have a rental property in Alabama, and I thought I was turning a profit until I entered in my rental income into Turbo Tax Premiere.
I received $15000 in 2015 from my tenants, and after all deductions (~$2000 for repairs, ~$1600 for insurance, ~$800 for taxes), I had to pay $1400 in taxes.
I didn't have to pay this much last year, which was my first year having the home as a rental property. I entered in depreciation information in last year's tax season, but I didn't have to enter that information in this year.
Just looking to see if this is about normal for a rental property.
My tenants pay $1250/month for rent, and my total mortgage payment (including taxes, insurance, PMI, etc) is $1120.
I have a rental property in Alabama, and I thought I was turning a profit until I entered in my rental income into Turbo Tax Premiere.
I received $15000 in 2015 from my tenants, and after all deductions (~$2000 for repairs, ~$1600 for insurance, ~$800 for taxes), I had to pay $1400 in taxes.
I didn't have to pay this much last year, which was my first year having the home as a rental property. I entered in depreciation information in last year's tax season, but I didn't have to enter that information in this year.
Just looking to see if this is about normal for a rental property.
My tenants pay $1250/month for rent, and my total mortgage payment (including taxes, insurance, PMI, etc) is $1120.
Posted on 3/11/16 at 9:43 am to StringedInstruments
quote:i know nothing about RE, but this seems like a terrible ratio. Unless that includes repair and such...
My tenants pay $1250/month for rent, and my total mortgage payment (including taxes, insurance, PMI, etc) is $1120.
Posted on 3/11/16 at 9:45 am to jimbeam
quote:
i know nothing about RE, but this seems like a terrible ratio. Unless that includes repair and such...
I'm an accidental landlord. It's priced for the area, but there's not much I can do about the mortgage especially thanks to PMI.
Posted on 3/11/16 at 10:06 am to StringedInstruments
quote:
My tenants pay $1250/month for rent, and my total mortgage payment (including taxes, insurance, PMI, etc) is $1120.
How could you think you were pulling a profit with this plus $2k in repairs???
Posted on 3/11/16 at 10:09 am to StringedInstruments
quote:
I received $15000 in 2015 from my tenants, and after all deductions (~$2000 for repairs, ~$1600 for insurance, ~$800 for taxes), I had to pay $1400 in taxes.
quote:
My tenants pay $1250/month for rent, and my total mortgage payment (including taxes, insurance, PMI, etc) is $1120.
Seems like we're missing something.
Did you deduct mortgage interest? Is the property completed it's depreciation schedule?
With the ratio of 1250 in and 1120 out, you should be operating at a considerable loss.
Posted on 3/11/16 at 10:14 am to Oenophile Brah
quote:
Did you deduct mortgage interest?
Yes.
quote:
Is the property completed it's depreciation schedule?
I don't think so. When I used Turbo Tax Premiere last year, it had me enter in a bunch of information. This year, it said it wanted to transfer info from last year's return, and I allowed it too. Then I answered the questions it provided. I never had to enter anything about depreciation.
quote:
With the ratio of 1250 in and 1120 out, you should be operating at a considerable loss.
Is there a way to deduct the loss? Will this be something that's considered with capital gains when I sell the house?
Posted on 3/11/16 at 10:42 am to StringedInstruments
I'm a little curious about something. You seem to have a fairly large mortgage, but pay very little in insurance in taxes (IMO). Are those amounts accurate?
With a mort. payment(PITI) of $1120 and only paying $200/mo in TI leaves you with an expensive mortgage. What is the term on the mortgage?
Would a refi be worth exploring?
With a mort. payment(PITI) of $1120 and only paying $200/mo in TI leaves you with an expensive mortgage. What is the term on the mortgage?
Would a refi be worth exploring?
Posted on 3/11/16 at 10:48 am to Oenophile Brah
Mortgage without the extras is $795/month. $173 for PMI. $70 for property taxes. About $90 for insurance.
30 year. Refinanced in 2013.
30 year. Refinanced in 2013.
This post was edited on 3/11/16 at 10:49 am
Posted on 3/11/16 at 10:58 am to StringedInstruments
You need to sell that property ASAP.
Posted on 3/11/16 at 11:01 am to StringedInstruments
Why do you own this?
Did you inherit an upside down property?
I was hoping with those numbers you were on a 15-20 year mortgage. That PMI is an albatross.
Mortgage about $170k? What do you think it's worth?
From what little bit I can tell, I would strongly look at selling.
ETA:
You beat me to it.
Did you inherit an upside down property?
I was hoping with those numbers you were on a 15-20 year mortgage. That PMI is an albatross.
Mortgage about $170k? What do you think it's worth?
From what little bit I can tell, I would strongly look at selling.
ETA:
quote:
You need to sell that property ASAP
You beat me to it.
This post was edited on 3/11/16 at 11:03 am
Posted on 3/11/16 at 11:04 am to Oenophile Brah
Classic case really - wife and I had jobs at 23. Parents said we should be buy a house. Exact quote from my dad - "You'll either make money on it or at worst break even." Bought the house at $179k in 2008. I think you know what happened next.
I think k could get $170k for it. Principal is at $161k now. Zillow estimate is $181k.
I'm hoping my current tenants buy it.
I think k could get $170k for it. Principal is at $161k now. Zillow estimate is $181k.
I'm hoping my current tenants buy it.
This post was edited on 3/11/16 at 11:11 am
Posted on 3/11/16 at 11:09 am to StringedInstruments
I would agree that you need to look at selling this property. Only getting that amount of rent for a property valued at $170K and having to pay PMI, makes this a pretty crappy deal for you. Just imagine if you had a HVAC, plumbing issue, etc. that ended up costing you $3-4K. If you owe $161K and can get $170K today, I would try and get out from under that asap.
ETA: Just my opinion but if you have to pay PMI on a rental property, you should own it. Not to say that it is impossible or anything but that is too much money to be spending on something that is not necessary.
ETA: Just my opinion but if you have to pay PMI on a rental property, you should own it. Not to say that it is impossible or anything but that is too much money to be spending on something that is not necessary.
This post was edited on 3/11/16 at 11:13 am
Posted on 3/11/16 at 12:07 pm to StringedInstruments
what was your agi? and what figure is on your schedule E?
maybe your rental loss is suspended due to agi limitations.
maybe your rental loss is suspended due to agi limitations.
Posted on 3/11/16 at 12:15 pm to stevengtiger
Property taxes in AL are ridiculous low. 200/month seems about right for an investment property with no homestead exemption.
I used turbotax too. The first year, you have to run through and set up the depreciation schedule. In subsequent years the depreciation should be automatically included AS LONG AS YOU KEEP USING TURBOTAX.
I'm in a very, very similar boat. Essentially zero cash flow, but don't let everyone tell you this is a terrible idea necessarily. It all depends on the specific area and your situation.
For me, I chose this route to let property values recover because I couldn't see paying 5-10K just to be able to move out of the house. 2 years later, property values boomed, and now we have 15K in equity. However, now is absolutely the right time for me to sell and pick up a better long term buy and hold investment property.
I used turbotax too. The first year, you have to run through and set up the depreciation schedule. In subsequent years the depreciation should be automatically included AS LONG AS YOU KEEP USING TURBOTAX.
I'm in a very, very similar boat. Essentially zero cash flow, but don't let everyone tell you this is a terrible idea necessarily. It all depends on the specific area and your situation.
For me, I chose this route to let property values recover because I couldn't see paying 5-10K just to be able to move out of the house. 2 years later, property values boomed, and now we have 15K in equity. However, now is absolutely the right time for me to sell and pick up a better long term buy and hold investment property.
Posted on 3/11/16 at 1:29 pm to AUjim
quote:
I'm in a very, very similar boat. Essentially zero cash flow, but don't let everyone tell you this is a terrible idea necessarily. It all depends on the specific area and your situation.
This has been my thinking for a while, but I think I'm going to sell. It was one thing to have my rental property HELP my tax return last year. This year, I had to pay $300 to the feds and $150 to the state, and I was getting money until I entered in my rental income. My family just can't handle surprises right now unfortunately.
My house is in the Alabaster, AL area, which has seen housing prices rise significantly since they decided to form their own school system. I was hoping to ride it out for a few more years to see how high the property value could get, but I guess if I can break even, that would be a whole lot better than losing $1400 (plus repairs and pest control and the home warranty monthly payment) a year.
Posted on 3/11/16 at 3:59 pm to StringedInstruments
quote:
It was one thing to have my rental property HELP my tax return last year. This year, I had to pay $300 to the feds and $150 to the state, and I was getting money until I entered in my rental income. My family just can't handle surprises right now unfortunately.
Something isn't adding up for me. I thought this rental property was generating a loss for you. If that's the case you definitely should not be paying more in taxes. If anything, your tax liability could be reduced depending on other factors.
You should hire a CPA.
This post was edited on 3/11/16 at 3:59 pm
Posted on 3/11/16 at 6:39 pm to OMapologist
I'm not a cpa but I own 3 rentals. My basic understanding is you should be depreciating the property on a 27.5 year scale for the house value not including the land. Let's say the land is worth $20k? $159,000/ 27.5 = $5,781 a year in depreciation.
If you were making about $800/ month then your taxes are about right. That's $9600- $5780, so about $3000 in income which explains what you owed.
If you were making about $800/ month then your taxes are about right. That's $9600- $5780, so about $3000 in income which explains what you owed.
Posted on 3/11/16 at 10:11 pm to StringedInstruments
quote:
Something isn't adding up for me. I thought this rental property was generating a loss for you. If that's the case you definitely should not be paying more in taxes. If anything, your tax liability could be reduced depending on other factors.
This. Can you preview your Sch. E in TurboTax? What are you reporting on line 3 (rents received), line 18 (depreciation), and line 20 (total expenses). Let's start there, but more information may be needed.
Posted on 3/11/16 at 10:32 pm to AUjim
quote:
. The first year, you have to run through and set up the depreciation schedule. In subsequent years the depreciation should be automatically included AS LONG AS YOU KEEP USING TURBOTAX.
I know with the HR Block website, I usually had to input the depreciation info each year as though it were new info. Go through your steps again & make sure you didn't miss it. I nearly missed it one year and was panicking til I figured out what I'd done wrong.
As another person suggested, look at the Schedule E it generates to see what's going on.
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