All Forum Posts by: Dave Toelkes

Commercial lenders will use projected rental income to determine the maximum loan amount your property qualifies for.  Consumer lenders generally do not use potential rent because there is no assurance you will get that rent or even when you will get it.  

@Steve Young

Your math is OK, but you did not use the last line of the table for the remainder of the half year of depreciation you are allowed.  Refer to IRS Pub 946, Table A-6.

In year 29, you take the remaining amount of the half year that you did not use in year one.  Use the percentage corresponding to the month you placed the property in service  In your example, the last year of allowed depreciation would be be 1.061% which just happens to correspond with the shortfall you thought you had.

It does look confusing -- the table has 29 years, but your class life is 27.5 years.  Just looking at the tables, years 2 - 28 are 27 years.  The partial year for year 1 and the partial year for year 29 total the half year of depreciation left in the 27.5 year class life.

@Mary Jay

Your depreciation calculations in your original post were absolutely correct for the scenario you described.

Depreciation reduces your taxable rental income. If you have $4545 in depreciation, then you avoid the income tax on $4545 of rental income.  

If you have a net passive loss and are able to take the full amount of the net passive loss allowance, then the reduction in your total tax liability is your marginal tax bracket rate times the amount of your net passive loss from the rental activity.  This amount could be greater then your actual depreciation expense, but since your question only addressed the tax savings due to depreciation alone, your assessment of the tax outcome was correct in your original post.

As a general rule, I don't allow pets at all, no matter how long I have owned the rental. In the 30+ years I have been landlording, I have never had a longer-than normal turnover vacancy because I don't allow pets.  But you probably need to consider each applicant's pet request on a case-by-case basis and abide by whatever constraints your rental dwelling insurance policy includes on type of pet, breed, weight, etc. Also, some condo associations don't allow pets in rental units.  I have condos in two separate complexes that have a no-pet rule for renters.  

i do currently have a long term tenant (twelve years, Section 8 for the past seven) who lost her husband some time ago.  A couple years after his death, she asked for permission to get a small dog.  This is a long term tenant, always on time with the rent, and takes care of the property.  I will probably have this tenant for the rest of her life.  I did grant permission for her to have a pet.  My property manager added a pet addendum to the lease.  Again, you can have a blanket rule but still make exceptions on a case-by-case basis.

Typically, SSI payments go out on the first day of the month. However, if that day is a weekend or holiday, then the payment gets moved earlier to the first available nonholiday weekday.

Social Security beneficiaries who started receiving their benefit checks before May 1997 have their checks deposited on the third day of each month (earlier if the third falls on a weekend).   For beneficiaries receiving their first check after May 1997, the benefit payments are deposited on the second, third, or fourth Wednesday of each month, depending on day of birth. If born between the 1st and 10th of the month, the check is deposited on the 2nd Wednesday of each month.  I was born on the 15th of the month.  My SS check is deposited on the third Wednesday of each month.  If the first day of the month is a Thursday, my SS check does not hit my checking account until the 20th.  

@Tiffany Drahonovsky

Check your state landlord-tenant laws.  You can set the rent due date for any day of the month, but your state law may require you to grant a five to ten day grace period before late fees are assessed.  Additionally, your state law may require you to honor the terms of the current lease for up to 60 days before you can enforce a new lease.  If you don't know your local landlord tenant law, having your first lease drafted by a real estate attorney may be a good investment especially for this inherited tenant and the lease you also inherited.  As for security deposits, most states require a separate escrow account for security deposits. Some states may even require you to pay interest on the escrow deposit at a rate set by law rather than the prevailing market rate.

By all means, speak with a real estate attorney in the area where the property is located.  Bring all paperwork you signed and the home warranty agreement to your meeting.

Let the lawyer help youo work through the issues you raised. If none of these issues were disclosed by the seller, you may have grounds to rescind the sale.  Get the attorney involved as quickly as possible.

Ryan,

Do you have a local university or community college?  Often these institutions will offer a month long class at night or weekends in topics of interest to the local community.  Mine has a life-long learning program offering over 140 classes in topics that include some popular software packsages.  cost per class varies, but nearly all are less than $100.  

If you get tired of Quickbooks online, you may want to consider Quicken Home and Business (about $150) and is available either as a cloud application or downloeadable as a desktop application.  Quicken has a built-in chart of accounts for a rental property activity.  It will amoritze loans and export your rental income and expense information to Turbotax.  TurboTax will handle your depreciation schedules.

I started out just using Excel spreadsheets to track my income and expenses, then migrated to Quicken in 2003.  I have looked at Quickbooks, and find Quicken for user more user-friendly and intuitive.  No matter which product you pick, there is a learning curve. I found the Quicken learning curve easier to overcome.

Duplicate post  

Regardless of how easy it may be for someone to draft a deed, SC law will not allow you to record a deed UNLESS it was prepared by a licensed attorney.  

Depreciation recapture is only calculated on what you are selling. The five-year appliance depreciated separately from the dwelling structure and replaced several years ago is no longer an item in your depreciable assets and therefore not subject to recapture when you sell the dwelling structure 30 years later.