All Forum Posts by: Moses Lin

Thanks for the response, Dave! Okay, part of that made sense and then you lost me.

Originally posted by @Dave Toelkes:

"If your rental expenses completely offset your rental income, giving you a net taxable rental income of zero"

-This is a true, my rental expenses will be more than my gross rental income.

"then you still have a positive cash flow from your rental operation."  

-This is where you lost me. If my expenses (renovations, mortgage, taxes, insurance, etc) are more than my income, on paper I have no positive cash flow. 

"The lender will adjust for your depreciation expense"

-What depreciation expense? The 27.5 year depreciation for the property? Or the depreciation of my 20k rehab?

Thanks for the response, Ashish! That's a new term for me, so I had to look that one up. From what I just read, De minimus safe harbor allows you to deduct the expense the same year (as long as its under $2500 per invoice) instead of depreciating it over time. In my situation, wouldn't I rather depreciate it over time so the deduction gets added back in? De minimus safe harbor would reduce my 2020 taxes, but would also reduce my buying power next year, right?

Thanks for the response, Michael! This sounds super counterintuitive for sure, but I'm glad you mentioned it because I didn't know it. I was actually considering under-reporting expenses this year to boost my "income". I figured the IRS wouldn't mind extra taxes haha. When you say it's a slippery slope, do you mean it's against IRS rules or just a bad financial decision?

Hello! Tax question from a new real estate investor. Right now, I have a side business making 100k/year and two rental properties I bought this year that cash flow about $800/month. If I deduct all my actual expenses, I'd probably pay little to no taxes, but then I wouldn't be able to qualify for a loan next year.

I know that depreciation for my business equipment and my properties are added back in to my income amount when I apply for a mortgage. Is there other real estate deductions that are also not counted against my income? Like renovation costs?

My question is, how can i maximize my buying power while minimizing my tax bill?