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Tax Basics for Landlords, Selling Rentals in Mesa, AZ

by | Dec 6, 2021 | Blog | 0 comments

If you own a rental property in Mesa, AZ let us help you reduce your tax burden when selling your rental property. First, we will go over some basic tax terms:

Taxes on Rental Income or Interest Income

You pay ordinary Income Taxes on any rental income or interest income paid to you throughout the year. However, the rental income can be reduced with any deductible expenses such as, mortgage interest, property taxes, insurance, depreciation, operating and maintenance expenses. Rental properties can be recorded on a Schedule E or a separate tax return if held in a separate entity, consult with your tax advisor or see how you have been previously claiming your rental income.

Tax Harvesting

This is used when there are losses in a given tax year.  If in the FUTURE years, the seller has a major loss and wants to declare all the remaining capital gains they could do so within a given year.  The installment payments are still in place, but future payments would NOT include any gains (capital gains) for the remaining life of the loan.  The future installment payments would go towards the principal and interest only.  However, the seller would still be responsible for the income tax on the interest payments.

Stepped Up Basis

The stepped-up basis (step up cost basis) adjusts the capital gains tax applied to investment assets passed on in death. When someone inherits a property, the IRS “steps up” the cost basis of those properties. For the purpose of capital gains tax, the IRS sets the original cost basis of the property to its value when the property is inherited. When the heir sells the property, they only pay money on profits calculated from the day they inherited it, so if you sell a property at the same price of the stepped-up basis you will pay zero capital gains tax when you sell it.

If looking to sell your rental property in Mesa here are three options, we can offer you to help reduce your tax burden:

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1. Installment Sale/Seller Financing:

Simply put you sell the property for payments over time instead of a lump sum up front price.  You are no longer the deed holder of the property, but you will continue to receive monthly or annual payments as agreed in the installment sale contract and spread out your gains over several years. This may be able to eliminate federal capital gains taxes completely.

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2. Lease Option:

You continue to hold the deed and receive monthly lease payments from Liz & Marie during the term of the lease then we purchase the home at the end of the lease period. However, you no longer are responsible for any maintenance, repairs, tenant troubles, broken leases or vacancies.  This helps defer your gains until you are in a lower tax bracket or take advantage of tax harvesting.

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3. Save Now Program:

Sell your property outright to Liz & Marie and save money on commissions, service fees, seller concessions, appraisals and repair costs. This is great if you recently inherited a property or have only owned the property for a few years.

This is a snippet from our book “How to Save $10,000 or more on Taxes when Selling your Rental Property” to download the entire book click here

About Liz & Marie

Liz & Marie are the area’s leading real estate solutions company. We successfully work with homeowners, buyers, sellers, real estate agents, and real estate investors, buying and selling all types of residential real estate. We are confident that we can find the right property or solution for you, whether you have a house to sell, are looking to buy your next investment property, or are looking for your family’s “forever home.” We can share our knowledge so that you can make the best decisions for your situation and we are dedicated to making everyone’s experience a smooth and successful process.

Liz & Marie specialize in buying and selling your home at the price, and on the timeline, that works for all of us. Our extensive knowledge of real estate investing and a large network of real estate investors nationwide allows us to offer more buying choices and a wide variety of selling options for all types of home buyers and sellers, including financially distressed homeowners. Our mission is to work hand in hand with all parties and to handle every situation with the utmost professionalism and care.

We are thrilled to be a part of this next chapter in your life. Our commitment to excellence starts with treating you and your transaction with the utmost care and professionalism. We know that buying and selling a home is one of the biggest decisions you’ll ever make and we are humbled that so many homeowners choose us to join them on their journey. Let us lead the way and earn your business today.

We may be Crazy Liz and Wacky Marie but together we can do anything. Our combined experience in real estate has given us tons of lessons and has provided us the opportunity to help many homeowners! We are always striving to learn more and help others!
Let us know how we can help you today!

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