Also it isn't even as good as mminer237 mentions, as many states also have a much lower exemption, and there is work in congress to get rid of the step-up in basis (a bad thing, imo) and to reduce the $12MM lifetime gift & estate exemption (a very good thing).
So yes, there are some advantages, but OP is vastly exaggerating as if it is some freebie to landlords when it is not. There were some freebies introduced in the bills in the Trump term for the type of LLCs that Trump runs, but IDK if they were fixed in legislation in this term.
If you want a general complaint, perhaps the angle is that capital is taxed much less than labor, under some notion that lower taxation is necessary to get people with capitol to actually deploy it in investments. I think that is provably false, and certainly does not require the level of tax code favoritism it currently enjoys.
[0] source: tax & estate attny at biglaw firm in the household, although this is just from info absorbed by osmosis over years and is NOT a detailed legal analysis.
Investment property:
* Deduct maintenance costs
* Deduct insurance costs
* Deduct property taxes
* Deduct mortgage closing costs
* Deduct mortgage interest
* Deduct HOA dues
* Deduct property management fees
* Take advantage of depreciation deductions
* Avoid paying cap gains taxes on sale using 1031 exchanges
Primary residence:
* Deduct property taxes (only on federal taxes, and only up to $10k, assuming you don't have other SALT to deduct)
* Deduct mortgage interest (only up to a loan value of $750k)
* Avoid paying up to $250k in cap gains taxes on sale
Doesn't that seem incredibly lopsided to you? The current tax regime makes it very attractive to own an investment property, but a basic need -- housing! -- doesn't give you much in the way of tax breaks. And the breaks that are there, are capped.
No, it does not seem the slightest bit lopsided.
There is zero difference between the deductability of expenses you mentioned and expenses for any other business.
Businesses are generally taxed on their PROFITS, which are [INCOME] MINUS [COSTS].
The regular homeowner is not running a business.
The same thing is true of a truck or racecar. If you own it as personal property, you don't get to deduct much of anything. If you own it and run it as a business, you can deduct your expenses before counting profits and paying taxes.
The same object can be either a personal property or a business, and it is the ACTIVITY that matters, not the object.
Your argument is either attitude & ignorance gone wild, or demagoguery attempting to confuse the issue with sleight of hand.
If you think that home ownership should be more subsidized than just the mortgage interest deduction, just say so and advocate for those subsidies. It'd be much more cogent, but you evidently don't want that discussion, or expect it to be a loser, which it likely is.
If I go and buy a half lamb for my personal consumption, I can't deduct it from taxes.
If I buy half a lamb, cook it and sell, I can deduct the costs because it's a buisness.
The former would be absurd and in most cases would make it impossible to be in business-- you'd take a net loss on every transaction unless your markup was greater than your tax rate. Good that went through fewer hands would be astronomically less expensive.
So why do you think that it's weird that a landlord doesn't pay taxes on the portion of his income that goes to the costs of operating the business?
> Avoid paying cap gains taxes on sale using 1031 exchanges
This is deferring the tax, not avoiding it.
> If you want a general complaint, perhaps the angle is that capital is taxed much less than labor, under some notion that lower taxation is necessary to get people with capitol to actually deploy it in investments.
Yes, I recall when cap gains taxes dropped significantly during GWB and was, sadly, happy. Of course, I was just a dumb 20-something and didn't realize how much of boon to the wealthy it was.
I'm not saying that there are no advantages or deductions, only that this character is trying to portray it as the govt basically giving landlords all the funding to become landlords. If that were the case, he should simply do it — there's plenty of no/low money down ways to get into it —, but I notice that he is not doing it. It just smacks of a lot more attitude than fact.
