Landlords should have to pay income tax on their rental properties regardless of whether they're rented out or not. - eviltoast

cross-posted from: https://lemmy.crimedad.work/post/12162

Why? Because apparently they need some more incentive to keep units occupied. Also, even though a property might be vacant, there’s still imputed rental income there. Its owner is just receiving it in the form of enjoying the unit for himself instead of receiving an actual rent check from a tenant. That imputed rent ought to be taxed like any other income.

  • Zink@programming.dev
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    1 year ago

    Many landlords don’t even pay taxes on the money they DO make.

    They can depreciate a property to offset their income, even though the property is going up in value. The catch is that they have to pay taxes on more of the money they get from selling the property. But if they don’t sell, potentially no taxes for decades. And if they leave it to their kids in their will, no taxes there either and the kid’s cost basis in the property is the market value at the time they received it. So they can start the depreciation all over again.

    This is how my non-expert self understands it anyway. It’s part of what draws some people into real estate.

    • taco_ballerina@lemmy.world
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      1 year ago

      More than that. You can depreciate the building (but not the land) to offset tax on the income but the bill eventually comes due because by depreciating it you’re lowering your cost basis. For example you buy a property for $150k. If you depreciate it long enough it’s worth $0. If you then sell it for $350k you have to pay tax on all $350k, not just the $200k gain in value.

      However If you intend to use the proceeds from that sale to buy another investment property or properties you can do a 1031 exchange to roll your adjusted basis into the new property. Thus even when you sell it you don’t have to pay the tax.

      As you might, expect tax laws are written to benefit constituencies that politicians value highly. Wealthy donors are among those constituencies.

    • keepcarrot [she/her]@hexbear.net
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      1 year ago

      Some places do have an estate tax (inheritance tax?), but there are often many ways around it and as such class still exists in the UK (say) with its 40% estate tax.

      I’ve also heard that the tax can result in an enormous bill to a family that suddenly has a single expensive illiquid asset. Far be it from me to shed a tear for people inheriting over a million dollars or whatever, but it does mean you give up your modest family home in an area whose land value has gone up.

      There’s an argument going on elsewhere in the thread whether you’d prefer the government be your landlord, which: a) Yes, in my country. Flat yes. The rate of public housing to demand is quite poor though, but it does exist. And I’ve lived in worse, more expensive, private rentals. b) Cuba has a “rent to buy” system which funds new housing while also meaning that you still build equity on a home over your lifetime. So the government is your landlord but not permanently. And Cuba has less homelessness than much much richer countries. (and c) I’m fine with living in a grey commie-box, but whatever)

      At least here in Australia, I’d at least want to see landlords politically disempowered. It’s actually quite hard to find any politician that doesn’t get passive income from owning homes, let alone their portfolio growing in value due to asset appreciation.

    • blueskycorporation@lemmy.world
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      1 year ago

      Once the property is fully depreciated, the trick is to do a 1031 exchange to buy a new one, and then you can depreciate the new one.