Although I love the gothamiat. I think they should pay taxes. But what does this have to do with personal finance?
this post was submitted on 24 Aug 2023
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This is just tinkering around the edges. We need land value taxes. This is a guaranteed way to solve these massive housing crises occurring in so many Western nations. LVT ensures expensive land is utilised better. Either by highly productive businesses, or higher density dwellings. Either way, society makes more efficient use of the land, and prices are constrained. It's an excellent way to ensure land banking is disincentivised, and that rentals don't stay vacant. Even Adam Smith was in favour of an LVT. Economists are almost unanimous on its efficacy. The only reason we don't widely deploy them is because it will hurt house prices and voters don't like that.
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Landlord should always have a few not rented places so that when someone is ready to move there is a place they can go. They also should be doing major remodels and upgrades approximately every 30 years which means a long stretch of not occupied.
By major remodels and upgrades I assume you mean slapping a coat of white paint to cover the cracks and mold, right?
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Many landlords don’t even pay taxes on the money they DO make.
They can depreciate a property to offset their income, even though the property is going up in value. The catch is that they have to pay taxes on more of the money they get from selling the property. But if they don’t sell, potentially no taxes for decades. And if they leave it to their kids in their will, no taxes there either and the kid’s cost basis in the property is the market value at the time they received it. So they can start the depreciation all over again.
This is how my non-expert self understands it anyway. It’s part of what draws some people into real estate.
More than that. You can depreciate the building (but not the land) to offset tax on the income but the bill eventually comes due because by depreciating it you're lowering your cost basis. For example you buy a property for $150k. If you depreciate it long enough it's worth $0. If you then sell it for $350k you have to pay tax on all $350k, not just the $200k gain in value.
However If you intend to use the proceeds from that sale to buy another investment property or properties you can do a 1031 exchange to roll your adjusted basis into the new property. Thus even when you sell it you don't have to pay the tax.
As you might, expect tax laws are written to benefit constituencies that politicians value highly. Wealthy donors are among those constituencies.
Once the property is fully depreciated, the trick is to do a 1031 exchange to buy a new one, and then you can depreciate the new one.
That's how it is here in Belgium. I pay tax on the income I would get if I would rent out my apartment, even when I'm actually living in it.
Luckily the amounts are based on rent prices as they were in 1975. It's indexed, which means it gets adjusted for (general) inflation, but not for the increased prices in the housing market which is much higher than inflation.
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Wow they don't????? Cool!!!!! i love incentivizing the use of housing as an asset to store money!!!! Fuck!!!!
A penalty for units that have been vacant longer than 6 months makes sense.
Units need to be rehabbed, but keeping a property uninhabited for long periods of time should have a disincentive tax applied to them.