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Social Security and rental income
Old 08-07-2010, 10:16 AM   #1
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Social Security and rental income

I was just reading the rules for taxation of Social Security benefits. It looks like your benefits get taxed, up to 85%, when your "provisional income" rises above $25,000 (for single filers like me). Your provisional income is your non-SS income plus half your SS income.

What's disturbing to me is that rental income contributes to your provisional income, yet mortgages and RE expenses don't take away from it. So rental income is likely to push you over the threshold, forcing you to pay tax on SS benefits, even if you're just breaking even (or even negative) on the rental.

The same would apply to other types of income, like dividends, but there you are cash-flow positive.

Am I misreading?
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Old 08-07-2010, 10:28 AM   #2
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Quote:
Originally Posted by Onward View Post
I was just reading the rules for taxation of Social Security benefits. It looks like your benefits get taxed, up to 85%, when your "provisional income" rises above $25,000 (for single filers like me). Your provisional income is your non-SS income plus half your SS income.

What's disturbing to me is that rental income contributes to your provisional income, yet mortgages and RE expenses don't take away from it. So rental income is likely to push you over the threshold, forcing you to pay tax on SS benefits, even if you're just breaking even (or even negative) on the rental.

The same would apply to other types of income, like dividends, but there you are cash-flow positive.

Am I misreading?
I don't know, but my guess is that only what flows from schedule E to the first page of the 1040 will count as RE income for the purpose you describe.

If your original post is correct, a way around might be a C-corp to hold RE.

Ha
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Old 08-07-2010, 10:35 AM   #3
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The articlde I'm reading says that, in determining your provisional income, "itemized deductions won't help you in this calculation." Hmmmm.
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Old 08-07-2010, 11:10 AM   #4
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Go to schedule E young man and you can report your rental income/loss above the line. Your itemized deduction will have nothing to do with your rental income/expenses.
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Old 08-07-2010, 11:11 AM   #5
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Yes, the thresholds for SS taxation are obscenely low. You can thank the folks who refused to add inflation indexing to these thresholds, making this a rather steady stealth tax increase.
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Old 08-07-2010, 11:14 AM   #6
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my guess is that only what flows from schedule E to the first page of the 1040 will count as RE income
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Go to schedule E young man and you can report your rental income/loss above the line. Your itemized deduction will have nothing to do with your rental income/expenses.
Good news. Thanks.
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Old 08-08-2010, 10:35 PM   #7
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Now that you guys have "onward" all helped out. How can I hide my pension and nontaxable income? I assume this includes muni bond income?
I've got a few years before I can draw SS so guess I better start writing congress critters to add a COLA to the income limits
Steve

Here's a planner link, you may have already seen it:
Benefits Planner: Taxes and your Social Security benefits

Your adjusted gross income
+ Nontaxable interest
+ of your Social Security benefits
= Your "combined income
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