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Updated over 4 years ago on . Most recent reply
Reserves and Taxes, how does it work?
What's up everyone. I have been lurking around for while and I have a question I can't find the answer to.
Lets say I am renting out a home for $1,000 a month and I am setting aside 25% (lumped CapEx, Maintenance, Vacancy).
At the end of the year, I have a reserve of $3,000 designated for a certain purpose. Now let's assume I didn't have to spend a dime of this money. If this money is taxed, my reserve has been slightly diminished by the amount of tax paid. Is it possible to avoid this? Can I itemize/label/categorize this money so the IRS knows this is for a rainy day?
Thanks everyone, these forums have already provided a wealth of information!
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#5 Multi-Family and Apartment Investing Contributor
- Investor
- Shelton, WA
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#5 Multi-Family and Apartment Investing Contributor
- Investor
- Shelton, WA
@Royston McKaig Income is income whether you spend it or not. Good try though ;-))