How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Rakhi Vasavada Your Own Question

Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3890
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
43581946
Type Your Finance Question Here...
Rakhi Vasavada is online now
A new question is answered every 9 seconds

I am wondering about tax structures on rental houses. I am

Resolved Question:

I am wondering about tax structures on rental houses. I am looking to start acquiring rental homes within the next 6 months and was wondering the best way to go about it. Is it better to just operate as an individual, or is there tax advantages of forming a business of some sort to have write offs? I am looking to buy 2-3 houses this year as rental homes and just looking for the best strategic tax avenue to pursue. Hope you can help...

Is it possible to write off a down payment as a business expense?
Submitted: 3 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 3 years ago.

Dear Friend,

 

It is more than certain that there are more tax benefits of forming a Corporation rather than going on a Individual basis, i.e. at proprietary level.

 

So, I would strongly advice you to go ahead forming a corporation. Since a corporation is a separate legal entity, it pays taxes separate and apart from its owners (at least in the typical C corporation). Owners of a corporation only pay taxes on corporate profits paid to them in the form of salaries, bonuses, and dividends. The corporation pays taxes, at the corporate rate, on any profits.

 

A further corporation tax benefit is that corporations pay federal income tax at a rate lower than that of most individuals for the first $75,000 of their profits - 15% of the first $50,000 of profit and 25% of the next $25,000. Professional corporations are charged a flat 35% tax rate. All allowable corporate deductions are treated as business deductions, making the determination of adjusted gross income, which is so essential for individual taxpayers, of little relevance to the corporation. Corporate taxable income is computed simply by subtracting from gross income all allowable deductions and losses. Individuals, on the other hand, have to consider itemized deductions or the standard deduction.

 

You may also refer to http://www.webpronews.com/topnews/2004/05/05/tax-benefits-of-incorporating for having a brief idea of all the tax benefits of forming a corporation.

 

So, in a nutshell, you must consider operate in a corporate form rather than going on on individual proprietor basis.

 

I hope this helps...

Warm Regards,

 

Customer: replied 3 years ago.
Thanks for the response, so would you advise a C-corp or an S-corp?
Expert:  Rakhi Vasavada replied 3 years ago.

Dear Friend,

 

I would suggest you to go for S Corp. This is given some tax benefits and you will be able to better understand if you refer http://www.themoneyalert.com/Corp-Entity-Table.html

 

I hope this helps...

Warm Regards,

Customer: replied 3 years ago.
Is there abything I can do to get a tax break on the upfront 20% down payment I'll pay? Let's say it costs 20k for the first house... Is there anyway I can write that off?

Thanks. Sorry for not responding / accepting earlier I went to sleep!
Expert:  Rakhi Vasavada replied 3 years ago.

Dear Friend,

 

No.. You cannot write off the entire down payment. You can only write off to the interest paid on the mortgage and this would be reported by your mortgage lender on form 1098.

 

I hope this helps...

Warm Regards,

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3890
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and 3 other Finance Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    2073
    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
< Last | Next >
  • http://ww2.justanswer.com/uploads/RA/rakhi.v/2012-7-3_14374_RakhiVasavadaL.64x64.jpeg Rakhi Vasavada's Avatar

    Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    2073
    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
  • http://ww2.justanswer.com/uploads/BU/BusinessTutor/2012-2-2_115741_Kouki2.64x64.jpg Manal Elkhoshkhany's Avatar

    Manal Elkhoshkhany

    Tutor

    Satisfied Customers:

    1890
    More than 5000 online tutoring sessions.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    1755
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JK/jkcpa/2011-1-16_182614_jkcpa.64x64.jpg JKCPA's Avatar

    JKCPA

    CPA

    Satisfied Customers:

    838
    Bachelors degree and CPA with Accounting experience.
  • http://ww2.justanswer.com/uploads/starside8/2010-2-16_55433_DSCN1175.JPG Eric's Avatar

    Eric

    Financial Manager

    Satisfied Customers:

    558
    Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.
  • http://ww2.justanswer.com/uploads/FA/fastfile/2011-12-15_23139_Klein2011small.64x64.jpg R. Klein, EA's Avatar

    R. Klein, EA

    Accountant

    Satisfied Customers:

    397
    Intuit Ask a Tax Expert. QuickBooks Certified Pro Advisor (all editions)
  • http://ww2.justanswer.com/uploads/dkaplun/2009-05-17_173121_headshot_1_2.jpg Dimitry K., Esq.'s Avatar

    Dimitry K., Esq.

    Attorney

    Satisfied Customers:

    324
    NASD Licensed Rep, 1997-2001, Business Attorney