Tips on filing taxes when buying a house for rent

Tips on filing taxes when buying a house for rent Many Chinese people like to buy and rent out houses for investment purposes. Homeowners must keep receipts for the expenses they spend on repairing their rental homes so that...

When renting out a home, you can also use "Bonus Depreciation" to save taxes. The federal government has extended the validity period of this tax law this year, which is very beneficial to homeowners. Houses are depreciated every year. When renting, the depreciation part can be much higher than the normal depreciation amount. In this way, more depreciation, maintenance and other expenses will be deducted from the rental income, and the tax the landlord has to pay on the rental income will be less. In other words, the homeowner’s income from renting is higher.

If someone plans to sell the house on hand and buy a new house, they can use the "1031" tax deferral method, which uses the time difference between the "selling" and "buying" transactions to delay paying taxes. For example, if a house bought for 100,000 yuan is now sold for 250,000 yuan and a profit of 150,000 yuan is made, if the Internal Revenue Service charges a tax at a rate of 30%, the homeowner will need to pay a tax of 50,000 yuan. If you use the "1031" method to buy another house within the specified time, then the tax of 50,000 yuan does not need to be paid now, and can be paid later when the house is sold. Of course, the "1031" tax deferral method must meet many requirements. For example, the investment house must be exchanged for an investment house and cannot be exchanged for a home; the transaction must be completed within the specified time; the newly purchased house must be equal to or greater than the value of the old house, etc. To use "1031" tax deferral, you must prepare in advance and strictly follow the "1031" requirements for exchange under the guidance of tax experts to avoid unnecessary losses.