Rental Income + Taxes + How will this come out on taxes ?

Question

I need some help and confirmation please, given as how have the year is now over and 2017 Tax season isn't all that far away . This year will be the first year that I will have had 2 Rental Properties Income received from both for the year will be about $14,000
My Questions please are:
1. will this $14,000 from Rental Income be counted as actual Income I earned/Received to Lenders ? Meaning ............ If this will use this $14,000 as my actual Income, then I can then add this $14,000 with what I earn from my Job, and this will therefore Increase my Income for 2017 by an extra $14,000 yes ?
2. Regarding paying Taxes on the $14,000 ............. since this will all be from Rental Income , what will I be able to write off ( as a whole ) ? And will I have to most likely pay Taxes on the full $14,000 , or after Deductions and Writeoffs, will I likely only have to pay Taxes on say ............. 1/3 of this $14,000 as a ( most likely scenario ) ?
3. What is the Percentage that you have to pay on Rental Income .......... is it a set/standard % or does it vary dependent upon the Individual ?
Thank you so much for any and all help

Steve K. · Answer

@Michael Dunn , No, you don't pay tax on the full amount of rent collected. You pay tax on the "profit" each year, as defined by the IRS.if your 'gross' rent is $14,000 , you get to deduct many expenses from that before you (and your accountant, if you use one) calculate the "taxable income".Deductions include:all of the interest you paid on mortgage(s) on the properties (but not the principal repayment portion of the loan)the cost of property taxesthe cost of insurancemaintenance expensesfee of a property manager, if you pay oneand "depreciation" (defined as the cost of the building (excluding the land), divided over 27.5 years. So, if you had a $60,000 property, and you view that the land is worth $15,000 you get to consider depreciation on the $45,000 allocated to the building. $1636 per year or so, deducted.Some landlords find that these deductions allow them to pay tax on just a fraction of the rent received. (A few even say that they have a taxable "loss" at the end of the year, based on the depreciation calculation and how much interest, etc.)Good luck

Daniel Hyman · Answer

Michael Dunn There is an entire BP forum dedicated to this very question. You can learn a great deal by searching around the tax forum. In addition, as you grow your portfolio, you might want to consider hiring a CPA that specializes in real estate. Having someone on your team of whom you can ask tax questions, get information, and help with strategic tax planning is very empowering.

Marcelo Manfredi · Answer

Hi @Michael DunnThat is actually a great question. Im kind of in the same situation right now, been living off my rental income for the past 2 years and bought all my units while I was working (w2). I have some money to invest but haven’t filed my 2019 taxes yet and don’t know whether to maximize deductions or to show highest income possible to get financing.Could you please share your experience/ suggestions?Thanks a lot

Michael Dunn · Answer

Steve K. , Caleb Heimsoth and Daniel Hyman Thank you all so much for your replies............... a wealth of Information and very very Informative .......... Thank you all I wanted to add something real quick and get everyone's advice / Answer to if my thinking on the Following question is correct.Question: I def. want to show all the Rental Income I receive, via Income Earned . I am trying to get to where I can start to work Less from my actual job, by having the Rental Income I receive, help offset my Income from my Job. This is the main reason that I want to make 100% sure, that Lenders will use the Rental Income, as actual Income earned. Because if I start to work less at my current job, thinking they will use the $14,000 in Rental Income , but then come to find out that they will NOT use that $14,000 ............This would not be a good situation.I want to purchase another Rental come the first of next year ........ so knowing that Lenders will use the Income from Rent ALONG WITH my income I earn from my Job, I will be covered and thus able to qualify for a Loan to purchase another Rental .......... hopefully

Caleb Heimsoth · Answer

Steve K. Pretty much hit the nail on the head. I've talked to my cpa about this before and he's mentioned all the things above but I'll add a couple others. If you have a cell phone that you also use for real estate you can potentially deduct around half of your phone bill as a business expense. If you travel to the city of somewhere you have property most of those expenses will also be tax deductible. Same goes for any legal fees you may incur. I'm not a tax professional, consult a tax professional. Good luck