Tax Intro

Comments(3)

• 
  DaveT15th January, 2003

  Ascott,
  
  Your question is really too broad to give you a specific answer. Instead, let me just say that -- in a nutshell -- your income from real estate activites is taxable. The tax treatment and the tax rates may depend upon the specific facts and circumstances of the actual transaction.
  
  
  Certain tax rules dictate how much of your profit is taxable and at what tax rate. For starters, begin with the free IRS publications relating to capital gains and depreciation expenses. Read the posts in this forum, for discussion about specific tax issues. If you want to buy a book, I suggest you look at "The Real Estate Investor's Tax Guide" by Vernon Hoven. My copy is five years old, but you may still be able to find it at Amazon.com. John T Reed also has a book with a similar title. I have not read it, but a tax lawyer I trust did give it a favorable recommendation.
  
  For a good orientation to the legal aspects involved with real estate, suggest you take the same courses offered to prospective real estate sales agents. Taking the courses that lead to a license does not mean you have to sit for the licensing exam.
  
  As you become more focused on the specific investment strategy you want to undertake, come back to this forum to post specific questions as you develop them.
  
  As a parting thought, do not be too focused on the income tax you might pay on your profits. I would be more than happy to pay 100 times more income tax than I paid last year -- that would mean that I made 1000 times more money. Our federal income tax structure always lets us keep more of our profits than we have to pay in taxes.[ Edited by DaveT on Date 01/15/2003 ]

• 
  Ascott15th January, 2003

  Thanks! I'll definitely take a look at those books.
  
  Ashley

• 
  Vern15th January, 2003

  Ascott, I worried about what taxes I would be able to regain from my real estate investments also. I wanted to know what closing cost would I be able to recapture. What management fees, what cleaning cost, damages from renters, lost income from vacancies, cost of painting, tool purchases, travel mileage, depreciation, mortgage interest, car or truck leases, points, utility bills, legal fees, bad debts, and other loses. Well you see all of these are tax deductable from you total rental income.
  So you should be able to get a good tax break once you get going with REI.
  If you want to read about these item go to IRS website.