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No tax benefits for owning a duplex in a state where you do not live

Posted by John Reed on

A REDDIT real estate investing group member from CA posted, “In doing research, I read there is significant tax benefits to owning a out of state rental.”
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No federal income tax benefits at all.
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If the property is in a lower or zero-tax-rate state, and CA does not tax you on out-of-state profits, that might be a benefit. But it would probably be not worth as much as the incremental cost of owning and managing an out-of-state rental property.
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Also, what tax are you talking about? Income tax on the duplex rental income? If you have a mortgage, you will almost certainly have NO taxable income from the duplex for decades because the rent minus operating expenses minus interest minus depreciation will be a negative number for a long time.
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Put simpler, who the hell told you that you would have ANY taxable income from any duplex anywhere in the US? The Easter Bunny?
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One REDDIT member said both of these states—CA and OH—have high property taxes. That’s false. https://www.rocketmortgage.com/learn/property-taxes-by-state
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CA ranks 31st and OH 7th in high property taxes. Plus, in CA, in each year your property taxes fall farther and farther behind inflation. My wife and I have owned our current CA house since 1983. Our current annual taxes are about $8,848 on a $2,636,539 house (Redfin). That is $8,848 ÷ 2,636,539 = .34%. That is almost identical to the LOWEST state in the Union, HI.
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This REDDIT inquiry manifests the level of information 1.8 million members of the real estate investing group have on REDDIT. REDDIT must mean “how not to invest in real estate” in some language.

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