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what are the tax implications of keeping our first home and turning it into a rental when we buy our second?
We are looking to buy a home in another city and want to know what will happen from a tax perspective if we keep our first home and use it as a rental. We won’t be able to write off the interest, but I really don’t know what the overall picture would be or how I can find out, short of paying someone a lot of money to tell me.
Whether this is beneficial from a tax perspective depends on what you paid for the house, what it is now worth, how much rental income you can get, how long you are going to hold it, what you eventually sell if for, and what your tax bracket is.
Here is one example to illustrate some of the tax issues.
If you convert your residence into a rental property, you are giving up the tax-free gains you can receive upon selling your principal residence. For example, suppose your home cost you $275,000 and now it is worth $400,000. If you lived in it for 2 years before selling, you can take the gains of $125,000 tax-free.
If you convert to a rental, you would receive rental income, and then deduct expenses. Your expenses would include mortgage interest, real estate taxes, repairs, maintenance, etc. See Schedule E of Form 1040 for a more complete list of deductions. In addition, you could deduct $10,000 a year of depreciation. This may cause most or all of your rental income to be tax-free because of deductions. You may even be able to take a loss if your income is below $100,000.
Now suppose you sell the rental property after 10 years for $500,000. Your gain is
$500,000 – $275,000 + $100,000 = $325,000
You will have to pay tax on the profit of $225,000, plus pay tax on the depreciation you took of $100,000.
Of course, you will have received rental income for 10 years. You have to decide if the income received from the rental is going to compensate for the fact that you are giving up your exclusion to the tax on the gain on the sale of your principal residence.
Read the instructions to Schedule E for more details.
http://www.irs.gov/pub/irs-pdf/i1040se.pdf
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You joined a great opportunity and now it’s time to go to work. If you are like a lot of mlm distributors you may be getting a flood of conflicting advice about what is the best way to build your business. One of the first things an mlm distributor is told to do is to buy a list of home business mlm leads and start calling them.
Home business mlm leads can be expensive, sometimes $5 and more per lead. Then calling the leads can be a very time consuming and frustrating experience.
So is calling home business mlm leads an effective way to recruit distributors?
First let’s look at what a lead is. A home business mlm lead is someone who has filled out a form indicating that they would like some extra money. When you think about it who wouldn’t like to have extra money? If you just started calling people out of the phone book chances are most of the people you call are people who would like to have extra money. But just because someone wants extra money doesn’t mean they are in any way interested in joining an mlm opportunity. So What’s the difference between a home business mlm lead and people you called out of the phone book? The main difference is the lead cost you a lot more money.
Before anyone will join your mlm opportunity they will need three characteristics. First they must have a desire too make more money. Second they must be interested in actually taking action to get the money. And third they must be interested in joining an mlm company to make it happen.
Calling purchased leads just like calling people out of the phone book is like playing the lottery. If you call enough of them you will eventually find someone who has these three characteristics. Most of the people you call will not have all three of these. A more effective approach is to only prospect people who do have these characteristics. Who would those people be? Other mlm distributors. People who are already in mlm or have been in mlm are they people who have already demonstrated they have the 3 characteristics of someone who will join an mlm opportunity. Home business mlm leads are people who are mostly just curious, mlm distributors are serious buyers. That’s what we want serious proven buyers.
How to find and recruit mlm distributors.
http://ezinearticles.com/?Is-Buying-Home-Business-MLM-Leads-an-Effective-Way-to-Build-Your-Business?&id=1959100
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