Do I need to pay taxes from a rental income?

Question

The rental income is $600/mo and mortgage is $600/mo. The rental income goes directly to the mortgage, do I still need to pay taxes??

Thanks!

Answer 1

Er, Yes. You have a liability to pay tax on any income. I don't think you can offset any expenses against the income. Unless you set up a company. I may be wrong check it out with an accountant.

Sorry that's UK, I see you are US!

Also liability for CGT if/when you sell the property. And IHT of course.

Answer 2

you can only deduct the interest and taxes part of the mortgage, not the principal, but you can also deduct any utilities you pay like water/sewer/trash, lawn care, exterminator fees, snow removal and also depreciation on the house, so you might actually wind up with a deductible loss - you need to report everything on schedule E or your 1040

Answer 3

Technically you are supposed to pay taxes on every dime you make.  Yard sale?  That's income.  Rental?  They want their cut.  s***w em.  If you can shelter it, don't pay.  

Answer 4

Yes....and no.

Rental Income and Expenses go on Schedule E.

You claim the income but you can deduct mortgage interest, rental expenses and depreciation.

Assuming that you are renting it for Fair Market Value, the rental property can usually create a tax loss for you.

See a professional.  Rental properties make a tax return complex and are very easily messed up by a novice.

Answer 5

Yes.  You can't deduct the entire mortgage payment.  Some of that goes to principal, and while you can claim depreciation on the property, you don't get the claim the entire principal payment.

Answer 6

If you are renting your property with a profit motive, and charging market rates, then you pay taxes only on the net income after expenses.  From your rent of $7,200 per year, you can subtract your mortgage interest, insurance, repairs, etc.  This is done through Schedule E.  

If your expenses exceed your income on a for-profit rental, then you may be able to take a loss, depending on the amount and type of your other income.

If your rental is not-for-profit, you will record your rental receipt as "other income", and take your expenses on Schedule A as personal deductions.  You will not be allowed a loss in this case.

Discuss the details of your situation with a preparer knowledgable about rental income.  

Answer 7

Wayne Z is right on track.  You do need to fill out a Sch. E showing your income and expenses.  You can also depreciate the property which is form 4562.  Go to www.irs.gov and read publication 527   (http://www.irs.gov/publications/p527/ind... It's about residential rental property.  It will tell you what you can claim as expenses.  If you drive to the rental property to make repairs you can deduct mileage, you can deduct what you spend on advertising, the cost of repairs, things like that.