Just paid off a mortgage!

[Eggman]

Presumably his state income tax is greater than $900, so he's not getting the full deduction.

 

Kevin Slater

 

Kev - sadly, your presumption is correct. Trump's tax bill is costing me approximately 10 grand that I can no longer deduct!

[Eggman]

I assume that those in NYC, LA, SF and other "blue" states are equally screwed.

[instudiocity]

Mazel Tov. When I paid off my mortgage in DC, I had to start paying my property taxes directly to the DC government rather than having them included in the mortgage payment. Writing those semi-annual checks is painful as the property taxes in DC are exorbitant. And the Trump $10,000 deduction cap on state and property taxes hits really hard, especially for those of us in "blue" jurisdictions.

Set up a money market account that auto-drafts your bank account on paydays for the % of the semi-annual payments. Then when the payment comes due, you can simply pay the bill without the big drop in your bank account.

[Kevin Slater]

I assume that those in NYC, LA, SF and other "blue" states are equally screwed.

 

Unless, of course, the apartments are rented out, in which case the entire property taxes are fully deductible as business expenses, not contributing to your SALT cap.

 

Plus, you get to depreciate ~3% of the purchase price (technically, one twentyseventh-and-a-half of what you paid for the structure but not the land) each year. And should you bequeath the unit upon your death, the inheritor gets it at a stepped-up cost basis so the government never recovers that accumulated depreciation.

 

All of this and more is why I love rental properties.

 

Kevin Slater

[instudiocity]

I assume that those in NYC, LA, SF and other "blue" states are equally screwed.

I wasn't screwed by the SALT limit of $10,000. My LA property tax is less than $3k per year. My state income tax ate up the rest of the $10K, but doubling my personal exemption to $12,000 (in 2018, $12,200 in 2019) covered what the SALT limitation took away.

 

My Federal Taxes paid has dropped from 22% in 2017, before the tax law, it's now 17%.

[RM]

I wasn't screwed by the SALT limit of $10,000. My LA property tax is less than $3k per year. My state income tax ate up the rest of the $10K, but doubling my personal exemption to $12,000 (in 2018, $12,200 in 2019) covered what the SALT limitation took away.

 

My Federal Taxes paid has dropped from 22% in 2017, before the tax law, it's now 17%.

Thank goodness for Prop 13.

[Eggman]

Thank goodness for Prop 13.

 

You boys in California are very lucky. In DC, property taxes are based on current assessed values, which go up significantly every year.

[BSR]

I wasn't screwed by the SALT limit of $10,000. My LA property tax is less than $3k per year. My state income tax ate up the rest of the $10K, but doubling my personal exemption to $12,000 (in 2018, $12,200 in 2019) covered what the SALT limitation took away.

 

My Federal Taxes paid has dropped from 22% in 2017, before the tax law, it's now 17%.

 

By & large, the SALT cap hurt only the very top income brackets in blue states. As your case demonstrates, most ordinary folks benefited from the doubled individual deduction. How ironic that Schumer, Pelosi, and other blue-state politicians attacked the tax cuts as only benefiting the rich, then turned around & demanded the elimination of the SALT cap, which would only benefit the rich.

[instudiocity]

You boys in California are very lucky. In DC, property taxes are based on current assessed values, which go up significantly every year.

The same condo in my building sold last year for $800K... Their property tax is $10K per year.

 

Remember Howard Jarvis and Prop 13 - it fixed valuation at purchase price plus COI increases every year. I've lived in my home 25 years and my valuation for tax purposes has risen to $247K.

[instudiocity]

Kev - sadly, your presumption is correct. Trump's tax bill is costing me approximately 10 grand that I can no longer deduct!

So it's really costing you your marginal tax rate on that $10K, so at worst $3950?

[+ nycman]

I just paid off my final mortgage. All three apartments are free and clear now.

Great....now I’m fantasizing about fucking a financially responsible dork who has a minor graphing fetish.

 

Funny how your kinks change as you get older.

[Kevin Slater]

Thank goodness for Prop 13.

 

I'm not a fan of Prop 13. It basically freezes the property tax rate of those (predominantly white folk) who owned homes in 19-clickety-clack, while charging their neighbors in an identical house several times (?) that rate for identical services. And by making it expensive for empty nesters, say, to move (because their property taxes would reset at the current level), it's exacerbating the housing crisis by causing those folks to over-consume housing stock.

 

Kevin Slater

[BSR]

I'm not a fan of Prop 13. It basically freezes the property tax rate of those (predominantly white folk) who owned homes in 19-clickety-clack, while charging their neighbors in an identical house several times (?) that rate for identical services. And by making it expensive for empty nesters, say, to move (because their property taxes would reset at the current level), it's exacerbating the housing crisis by causing those folks to over-consume housing stock.

 

Kevin Slater

 

I agree with everything you said. Prop 13 causes plenty of other problems, like inadequate local funding for schools because of "artificially" low property taxes. Unfortunately, the beneficiaries of Prop 13 would rip their own gonads out before allowing Prop 13 to be overturned.

[+ bigjoey]

Unless, of course, the apartments are rented out, in which case the entire property taxes are fully deductible as business expenses, not contributing to your SALT cap.

 

Plus, you get to depreciate ~3% of the purchase price (technically, one twentyseventh-and-a-half of what you paid for the structure but not the land) each year. And should you bequeath the unit upon your death, the inheritor gets it at a stepped-up cost basis so the government never recovers that accumulated depreciation.

 

All of this and more is why I love rental properties.

 

Kevin Slater

You do not have to die for the government never to collect the accumulated depreciation and any capital gain:

1-Donate the property to charity and you get a full deduction for the market value and never record the gain?.

2-Do a 1031 exchange when you want to sell the property.

[+ bigjoey]

I'm not a fan of Prop 13. It basically freezes the property tax rate of those (predominantly white folk) who owned homes in 19-clickety-clack, while charging their neighbors in an identical house several times (?) that rate for identical services. And by making it expensive for empty nesters, say, to move (because their property taxes would reset at the current level), it's exacerbating the housing crisis by causing those folks to over-consume housing stock.

 

Kevin Slater

True BUT Prop 13 also protects middle class people from being forced out of their homes when the prices go up over time or the area becomes gentrified.

 

I have a friend who bought her home about 45 years ago for about $30,000 in Culver City. Today, about half the old houses on her block have been torn down and replaced by McMansions. Her lot would sell for about $1.5 million. She was a preschool teacher. Based on today’s market valuation, she could not afford her taxes and be forced to sell. Prop 13 protects people like her.

 

Prop 13 has a good and bad side.

[Kevin Slater]

You do not have to die for the government never to collect the accumulated depreciation and any capital gain:

1-Donate the property to charity and you get a full deduction for the market value and never record the gain?.

2-Do a 1031 exchange when you want to sell the property.

 

Good points.

 

I've looked into 1031 like-kind exchanges. The process sounds dicey. You have to have a maximum of three candidate properties identified at the time of the original sale, and must close on one of those within a specified (somewhat short, if I recall) time period. I'm concerned if the subsequent purchase gets held up, you end up getting hit by all that accumulated depreciation (which is taxed at 25%).

 

But given the tax advantage, it may be worth the effort and risk.

 

Kevin Slater

[TruthBTold]

According to the largest survey of millionaires ever conducted:

 

"The overwhelming majority (79%) of millionaires in the U.S. did not receive any inheritance at all from their parents or other family members. While one in five millionaires (21%) received some inheritance, only 3% received an inheritance of $1 million or more."

 

"In fact, the majority of millionaires didn’t even grow up around a lot of money. According to the survey, eight out of 10 millionaires come from families at or below middle-income level. Only 2% of millionaires surveyed said they came from an upper-income family."

 

As much as I don't want this thread thrown into P&R, I couldn't let RealAvalon's assertion go unchallenged.

 

Back on topic, congratulations @Kevin Slater! If you do get any marriage proposals, two words of advice:

"Pre" and "Nup"

 

 

"In fact, the majority of millionaires didn’t even grow up around a lot of money. According to the survey, eight out of 10 millionaires come from families at or below middle-income level. Only 2% of millionaires surveyed said they came from an upper-income family." I am not saying it is not the truth but the info seems to reflect that it comes from surveys which appears to be info collected from individuals rather than agencies or organizations that simply fill out a survey.

[BSR]

"In fact, the majority of millionaires didn’t even grow up around a lot of money. According to the survey, eight out of 10 millionaires come from families at or below middle-income level. Only 2% of millionaires surveyed said they came from an upper-income family." I am not saying it is not the truth but the info seems to reflect that it comes from surveys which appears to be info collected from individuals rather than agencies or organizations that simply fill out a survey.

 

Feel free to present evidence that most money is inherited, that most of the upper class was raised upper class, and that very few Americans move up from the class in which they were born.

[+ bigjoey]

Good points.

 

I've looked into 1031 like-kind exchanges. The process sounds dicey. You have to have a maximum of three candidate properties identified at the time of the original sale, and must close on one of those within a specified (somewhat short, if I recall) time period. I'm concerned if the subsequent purchase gets held up, you end up getting hit by all that accumulated depreciation (which is taxed at 25%).

 

But given the tax advantage, it may be worth the effort and risk.

 

Kevin Slater

Thr time to close on the new property in a 1031 exchange is 180 days. Normally, that is plenty of time, especially if the new property is identified in advance.

 

Most Real estate agents are familiar with the process and can help smooth the way.

[jawjateck]

Congrats on investing your earnings and managing debt wisely. Man oh man, that's hot!

[RealAvalon]

According to the largest survey of millionaires ever conducted:

The limit of your imagination is staggering. But on to happier things.

 

@Kevin Slater it's great not being tied down by a bank and that constant payment. (Two properties free and one last to go.)

 

How are you planning on celebrating? A mortgage burning bbq ...

Edited February 26, 2020 by RealAvalon

[RealAvalon]

Feel free to present evidence that most money is inherited, that most of the upper class was raised upper class, and that very few Americans move up from the class in which they were born.

Do you have any curiosity? A quick Google search provides numerous studies from both business and social policy sources. Good to try though @TruthBTold

//www.businessinsider.com/social-mobility-is-on-the-decline-and-with-it-american-dream-2017-7

Edited February 26, 2020 by RealAvalon

[+ purplekow]

According to the largest survey of millionaires ever conducted:

 

"The overwhelming majority (79%) of millionaires in the U.S. did not receive any inheritance at all from their parents or other family members. While one in five millionaires (21%) received some inheritance, only 3% received an inheritance of $1 million or more."

 

"In fact, the majority of millionaires didn’t even grow up around a lot of money. According to the survey, eight out of 10 millionaires come from families at or below middle-income level. Only 2% of millionaires surveyed said they came from an upper-income family."

 

As much as I don't want this thread thrown into P&R, I couldn't let RealAvalon's assertion go unchallenged.

 

Back on topic, congratulations @Kevin Slater! If you do get any marriage proposals, two words of advice:

"Pre" and "Nup"

Individuals who pursue professions can become millionaires. As a result there are a lot of doctor and lawyer and dentist millionaires out there who started out without an monetary inheritance but a lot fewer multimillionaires who have done so. I would like to see your figures for those with 10 million or 25 million. I grant you there are sports stars and entertainment individuals who started out with little and who have gained great wealth. But as someone who started with a very blue collar way of life, mother a seamstress father a barber, becomeing a physician, even one with little desire to chase the dollar, it was hard to avoid becoming a millionaire. However, I may not have inherited wealth, but I did start out with a stable home, food on the table and an opportunity to go to school with minimal expense through the state system. my guess is most millionaires were similarly blessed.

So I think I inherited a lot to become a millionaire, but I would have needed to add monetary support to make it to the realm of the multimillionaires.

By the way, many rich folks tend to downplay the role of the factors that got them there. In addition, inheritances are usually given with the death of a parent, less so other relatives, so do your figure include, gifts, trusts, and assorted other monetary gifts such as tuition and connections. Start including all the advantages that rich people have to accumulate more wealth and your figures would likely turn into the ether up which they were written,

Back to Kevin, three apartments free and clear except for everything else you need to keep them going, congrats to you. Did you have a mortgage burning party? My parents had one when they finally paid off the mortgage on their $14000 home after the usual 25 to 30 year trek.

[+ purplekow]

By & large, the SALT cap hurt only the very top income brackets in blue states. As your case demonstrates, most ordinary folks benefited from the doubled individual deduction. How ironic that Schumer, Pelosi, and other blue-state politicians attacked the tax cuts as only benefiting the rich, then turned around & demanded the elimination of the SALT cap, which would only benefit the rich.

I am not sure if you live in one of the red states that underpay taxes and take the biggest grab from the federal government or one of the more heavily taxed blue states that keep giving money. If you live in a blue state with state income tax and property tax, trump tax reform, reformed your bank account in a negative way. trump became a Florida citizen, I would say it wa partially to minimize his taxes but of course he does not pay any taxes so that really wasn't the reason.

[+ keroscenefire]

Congrats to you all for your financial successes. Makes me think that I should probably be saving more money so I could buy a place someday. But then I probably couldn't afford hanging out with so many sexy men. :p:p