If you priced rent at the cost to service the mortgage, utilities and taxes, there wouldn’t be a profit.
Yes, but if that is below market rates for your area, watch out for an audit! You have to have a very large mortgage payment in my neck of the woods to cancel out the astronomical market rates… 
@BunsenBurner you are correct. You technically can’t rent too far below market rates. Well I guess you can but as you said it could trigger an audit.
We need to run the specific numbers. We live in a high cost area ,still have some pretty high mortgage and property tax costs. Part of the rental agreement would be maintaining parts of the property - in exchange for a lower monthly rent. Insurance, maintenance, etc would then be business expenses in addition to the interest and property tax costs.
Also, once the property is a rental it is eligible for 1031 exchanges which could shelter any capital appreciation from taxation as long as it is eventually ‘rolled over’.
Keep it going until one of us dies, have the kids take the stepped up basis. If they (or we) decided to get out of the game the tax man will get their due. But why not hang on to the $$ as long as possible and let them work for US instead of - well -THEM.
An attorney teaching estate planning classes said that the IRS loooves to pour over RE transactions to look for discrepancies (especially transfer of RE at below market prices to minimize gift tax). But an LLC is certainly a good way to hold RE outside of one’s state of residence. No probate! And could mean real limited liability!
I read an article yesterday that one of the largest lobby groups opposing the loss of the mortgage interest deduction (NAHB - National Association of Home Builders) is no longer objecting to it. Could be that there is indeed more than one way to skin a cat and people will still need a place to live regardless of if they can deduct it. In our state renters can get a tax credit if they pay their own utilities.
H&R block was on a shpw the other day. He said there’s a shortage of housing, something like 60M. With or without deduction, people will buy according to him.
The tax plan on the table retains the mortgage interest deduction. So the NAHB is open to eliminating a deduction that isn’t being eliminated (at least at this point).
Depends on the local market. Lots of slack in housing right now in, say, suburban Anchorage, Alaska, not to mention a good number of small historically agricultural towns in the lower 48.
I think there is a problem with doing that when you are living in your own unit.
You would not have a loss to deduct either.
‘We’ wouldn’t own the property. It would be ‘owned’ by a corp. Once it’s been converted to a rental in the proper manner you a depreciation deduction. This will hopefully leave you with a (paper) loss.
I’m curious to see how this plays out. If you want more money, you have to get it from the people who have money. If you take in a lot less money, you either have to cut spending or blow up the deficit. I guess it looked like eliminating the state and local tax deduction was a way of getting more money from blue states, but it turns out that it’s not that simple–there are red districts in those blue states. Anyway, I predict that the final product will be a collection of tax cuts without much change to deductions or anything else.
Eliminating property taxes would also hurt some folks in one giant red state. Texas has high property taxes since there is no state income tax. I’m sure they wouldn’t be happy not being able to deduct them although if you double he std deduction that may solve the problem for some.
Eliminating the mortgage interest deduction and the real estate tax deduction (with only the latter on the table at this point to my knowledge) will impact the housing market. That would especially be true with respect to the interest deduction as interest rates are predicted to rise (still historically low). Those deductions reduce the cost of buying a house (with debt). May be those deductions should be eliminated. But there will be an impact in doing so. Though an increased standard deduction would mean fewer people would be impacted.
Though ultimately we need to see the entire tax plan to make any determinations. We are focusing on one or more specific provisions and the impacts they will have. But we don’t know at this point if there will be offsetting changes.
I read that one option that’s being discussed is allowing you to deduct mortgage interest or property tax, but not both.
If you can’t deduct both the doubling of the standard deduction will probably take care of that for all except those with very large mortgages/property tax bills.
Any way you slice it at this point, folks in the upper middle class range will get an increase in most instances. I will remain hopeful that this will change.
Canada has the exact same rate of home ownership as the US but they do not have a mortgage deduction in the Great North.
http://blogs.seattletimes.com/opinionnw/2013/08/12/homeownership-in-the-united-states-versus-canada/
I’m going to assume Canada never had the home mortgage deduction and therefore Canadians never made their financial plans based on this deduction. In the US most homeowners ran the numbers with SALT and interest deductions in their calculations.
Additionally Canadians pay no capital gains tax when they sell their homes. https://www.libertytaxcanada.ca/home-seller-selling-income-taxes/ *
Hoping this doesn’t violate TOS since it is addressing how another nation handles the situation. We’re doing a good job of keeping this thread non-political and I don’t want to be the one who blows it.
^:)^
Re: renting from your own LLC. I am somewhat skeptical this would work… but if the house is owned by a LLC, which is a separate legal entity, I suppose local laws may allow such a thing. An estate attorney versed in real estate can help with those questions. Oh, and if you have a mortgage, your mortgage co might treat the transfer to an LLC as a sale triggering that “pay in full” clause that most mortgages have. So be careful. Again, it pays off to pay a local lawyer!