Makes you want to rip your hair out-Federal Taxes.

[Boomyal]

Re: Makes you want to rip your hair out-Federal Taxes.

Boomyal,

Getting back to the original post...Are you saying that your adjusted gross income is low enough to not be taxed? The reason I ask is that would be the only reason you would not want to take the depreciation deduction...if you had a choice of course. I am also assuming that you have been depreciating your house in previous years.

Bingo Bruce, on point A. But you can be sure, the year I sell it, they will swoop down on me like a vulture, to get their piece of the one time bloated gain.

For point B, I am not aware that you could depreciate the value of your principal residence.

 

[ob]

Re: Makes you want to rip your hair out-Federal Taxes.

Property can be depreciated according to the local tax accessment value.For example ,homes in my neighborhood of comparable square footage and lot size two years ago were averaging $125,000-$150,000 on the open market.These homes are 20 to 25 years old.Most of them were acessed for taxes in that range or slightly less.However,the owner of the homes that sold in that same period of time for a price within the average value range in most cases had to perform upgrades in order to draw buyers.New roofs,new a/c systems,carpet,etc... Two years ago when my home was re-accessed for county taxes I contested my new higher accessed value because of it having the original roof,a/c system,etc, and the county lowered my accessed value to the tune of $20,000. In sumation ,at least where I live,you can indeed depreciate your principal residence if you have concrete grounds upon which to do it.Just have to do some homework and see if yours is depreciable according to your county or parishs' accessment guidelines.Down here our homes are tax accessed based on what homes in our neighborhood are selling for. Now granted ,I only paid $79,900 for my home 21 years ago and am paying taxes based on $112,000,but the tax accessment is lower than my neighborhoods homes average accessed value per square foot . In order for it to be depreciated to a less value than what it sold new for 21 years ago,it would have to be in pretty sad condition.

 

[Boomyal]

Re: Makes you want to rip your hair out-Federal Taxes.

Ob, I understand your point, however there is a considerable difference between what you are speaking of and what I am speaking of.

In your case, you are talking about getting a reduced assessment for purposes of computing a lower property tax bill.

In the case that bruce brought up, I think he was alluding to being allowed to deduct a predermined (by Fed Tax Law) portion of the value of your building, from each years taxable income.

For investment accounting purposes, the building, not the land, is considered a consumable item. Just like a tool, or a ream of paper. However, unlike the ream of paper that you can immediately deduct from your 'business income', expensive items are considered to have a long life.(again, as detemined by Tax Law) Therefore, you can only write off 1/?? of its purchase price each year. In the case of buildings I think it is 1/30th.

Now after thirty years, the building has been totally 'expensed' off. So it as if it no longer has any value. Ahah! but when you do sell it, you have to report your profit so as it can be duely taxed.

In this scenario, you do not compute your profit as the selling price minus the purchase price, you compute it based on the selling price minus it's depreciated value, which of course, is now zero. So basically,(simplified) your profit is the whole sales price.

Now along the way, if you were unable to use the the 1/30th depreciation amount to lower your current taxes, then it went to waste and the Government, once again, gets into your shorts!:'(

My point to bruce was, that you cannot do this with your principal residence and deduct that 1/30 th each year from your personal taxable wages (income).

 

[bruceb58]

Re: Makes you want to rip your hair out-Federal Taxes.

I actually meant your rental house not your pricipal residence.

I have 2 properties that I rent. I am in partnership with my dad on them and what we do is file each house as a seperate partnership so that depreciation can be moved to either of us whoever it benefits most.

Normally, I thought depreciation on residential rental property is 27.5 years. It is possible that number is different depending on the year the property is put into service.

 

[Boomyal]

Re: Makes you want to rip your hair out-Federal Taxes.

I actually meant your rental house not your pricipal residence.

I have 2 properties that I rent. I am in partnership with my dad on them and what we do is file each house as a seperate partnership so that depreciation can be moved to either of us whoever it benefits most.

Normally, I thought depreciation on residential rental property is 27.5 years. It is possible that number is different depending on the year the property is put into service.

I got ya Bruce. My property in question is small commercial. It's probably the same depriciation rate for either residential rental or commercial rental. In my case that would be 1/27.5th of the value that is wasted each year in the form of depreciation that I can't use but will have to pay capitol gains on when it is time to sell.

 

[G-Daddy]

Re: Makes you want to rip your hair out-Federal Taxes.

Residential real property is depreciated over 27.5 years. Nonresidential real property is depreciated over 39 years. You are correct that if you don't have a tax benefit you lose the effect but might still have to recognize gain at a later time. The rule is you must deduct "depreciation allowable" in calculating gain on the sale of a business use property.

 

[Boomyal]

Re: Makes you want to rip your hair out-Federal Taxes.

.... You are correct that if you don't have a tax benefit you lose the effect but might still have to recognize gain at a later time. The rule is you must deduct "depreciation allowable" in calculating gain on the sale of a business use property.

Yeah, G-Daddy, I know. The rule sucks!