Tax-Free Landlord Profit – (Tax Deferral)

Part 5 of "6 Tax Breaks Landlords Get that Hurt the Economy and You"

The landlord is making money every year on the rent but, in addition, the house is appreciating and is worth a lot more than what the landlord paid. The landlord could sell the house to get that money but then the landlord might have to pay taxes on the profit.

Instead, the landlord can just take out a second or third mortgage on the house and pocket all that cash… tax-free.

If the landlord used the money from that second or third mortgage to help buy another property, the interest on the tax-free cash out would be tax-deductible.

The tax-free profit-taking lets landlords defer paying taxes, sometimes forever, which increases landlord profits and that lets landlords pay more for houses so they bid up house prices for everyone.

This is another way the government subsidizes landlord debt but, as mentioned earlier, more landlord debt makes real estate busts bigger.

In addition, these tax breaks for buying things made long ago tend to divert money away from investments that would create more jobs and economic growth today.

Is that fair?

Next

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All

Part 1 – 6 Tax Breaks Landlords Get that Hurt the Economy and You

Part 2 – Depreciation Tax Deduction – (Tax Deferral)

Part 3 – 1031 Exchange – (Tax Deferral)

Part 4 – Mortgage Interest Tax Deduction – (Tax Reduction)

Part 5 – Tax-Free Landlord Profit – (Tax Deferral)

Part 6 – Taxes on Capital Gains are a Lot Lower Than Taxes on Ordinary Income – (Tax Reduction)

Part 7 – Stepped-Up Tax Basis – (Tax Reduction)

Part 8 – 6 Distortions of the Housing Market

Part 9 – 2 Sets of Rules for Single-Family Houses

Part 10 – Fixed Supply of Single-Family Houses

Part 11 - Houses for Homes, Not Tax Shelters

Part 12 - Solutions

Part 13 - Permanently Increase Economic Growth

Part 14 - Life is Crazy Enough

Part 15 - The Hardest Part

Part 16 - Distorted Back to Reality

Part 17 - Stop Distorting the Housing Market

Part 18 - Conclusion