the tax man commeth - Posted by Nancy in NC
Posted by Nancy in NC on April 07, 1999 at 20:33:26:
You always have to pay taxes on income.
I am not sure what type of “business” you have created.
However, in any business–rental income is passive income and that has some advantages.
What makes the income tax bite less serious is that you get credit for your rental expenses, like personal property tax, repairs, insurance, and advertising. Get a copy of schedule e, form 1040. Also your get to deduct depreciation. A mobile home used for residential rental purposes is depreciated at 27 1/2 years, so the amount is small.
Total annual rent - expenses - depreciation = amount subject to income tax.
Next business structure does affect picture, you talk about self-employment tax. That does not apply to rental income which is passive income.
You sound a little confused, and I am not a CPA nor legal advisor.
I rent some houses and some mobile homes. I hold title in a family limited partnership and the income or loss flows throught the partnership tax return to the personal tax return.
If you are renting now in your own name that is o.k.
Your plan will work, but not ALL of the rents will be reinvested. Some of the income goes to maintenance, local taxes, insurance, etc. (The cost of doing business.) If you borrow money to buy the homes, then you have to service the debt.
If these trailers are on rented lots, then you have lot rents to pay even if the trailers are vacant.
Trailers are a good way to make money, and I think they are easier and cheaper to remodel. But they also take a more managment time. You have to be very careful about the neighborhood you invest in and the type of tenant you are in the market for.
HAVE FUN AND REMEMBER TO KEEP A POSITIVE MENTAL ATTITUDE