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Resources - Taxes
- Capital Gains Rate - Capital Gains Tax
If you sold an income producing property after May 5, 2003, your gain will be taxed at the following capital gains rate. (please check the IRS tax codes for changes) For income property held more than one year, investors in a 25% or greater marginal tax bracket will be taxed at a 15% long term capital gains rate and a 25% recapture depreciation tax rate.
- Tax Deductions - Tax Write-offs for Income Property
Operating Expenses incurred via the operation and maintenance of an income producing property are tax deductible. Operating Expenses include such things as accounting fees, advertising costs, legal fees, insurance premiums, janitorial service, lawn maintenance service, leasing commissions, license fees, office supplies and expenses, pest control, property management fees, property taxes, repair costs, salary and wages, snow removal service, miscellaneous supplies, telephone, trash removal, vehicle mileage expenses, utilities, etc.
- Tax Reserves / Reserve Funds / Impound Accounts
Most mortgage lenders require that borrowers provide reserve funds or escrow accounts to pay future real estate taxes and insurance premiums. A borrower starts the account at closing by depositing funds to cover at least the amount of unpaid real estate taxes. The buyer receives a credit from the seller at closing for any unpaid taxes. Afterward, an amount equal to one month’s portion of the estimated taxes is included in the borrower’s monthly mortgage payment. The borrower is responsible for maintaining adequate fire or hazard insurance as a condition of the mortgage loan.