Income tax on rental properties

[Pete Tallerico]

Hi everyone!  As a total newbie, I'm trying to figure out this game and am confused about how much and when do you have to pay income tax on a rental property.  If I collect $1000 in gross monthly rent, that's $12,000/year rental income.  From what I've read, I can deduct operating expense, depreciation, and mortgage interest (but not principal?).  On the webinar, posts, and articles, everyone calculates cash flow by deducting expenses which include principal AND interest (among other things).  Can we do this?  When do we pay income tax on the income generated on the rentals?  Any help would be greatly appreciated!

[Brie Schmidt]

Originally posted by @Pete Tallerico:

Hi everyone!  As a total newbie, I'm trying to figure out this game and am confused about how much and when do you have to pay income tax on a rental property.  If I collect $1000 in gross monthly rent, that's $12,000/year rental income.  From what I've read, I can deduct operating expense, depreciation, and mortgage interest (but not principal?).  On the webinar, posts, and articles, everyone calculates cash flow by deducting expenses which include principal AND interest (among other things).  Can we do this?  When do we pay income tax on the income generated on the rentals?  Any help would be greatly appreciated!

 You will report all the income, and then deduct insurance, utilities, supplies, repairs, and mortgage interest.  Capital Expenses are depreciated, along with the property.  

The remaining profit is then added to your income and taxed as per your tax bracket, but we do not pay self employment taxes on it.  

Isuggest the BP book on tax strategies

https://www.biggerpockets.com/store/the-book-on-ta...

Here are a few articles that may help

https://www.biggerpockets.com/blogs/1174/51722-pay...

https://www.biggerpockets.com/blogs/7587/54748-tax...

https://www.biggerpockets.com/blogs/4445/50236-tax...