[SoCalGal]

How to retire from being a landlord: A Delaware Statutory Trust (DST) is a legally recognized trust formed under Delaware law, primarily used for business purposes, such as holding real estate or other assets. It’s a flexible, separate legal entity where a trustee manages assets for the benefit of investors (beneficiaries), who hold beneficial interests rather than direct ownership. DSTs are commonly used in real estate for 1031 exchanges, allowing investors to defer capital gains taxes by reinvesting proceeds from property sales into like-kind properties. They offer limited liability, passive investment opportunities, and streamlined management, with the trustee handling operations. However, investors have limited control, and DSTs are subject to specific IRS rules for tax benefits.

If you have heirs, you can gift money, tax-free to them, during your lifetime. Experience the joy of seeing their lives improved while you live. The federal estate tax is levied on the estate of the deceased, not the beneficiary. For 2025, the federal estate tax exemption is $13.61 million per individual. If the Florida decedent’s estate is valued at or below this amount, no federal estate tax applies, and Johnny would receive the $2 million without federal estate tax liability. If the estate exceeds $13.61 million, the estate may owe tax (up to 40% on the excess), paid by the estate before distribution, not by Johnny.

Citation: Internal Revenue Service, "Estate Tax," updated for 2025, Estate tax | Internal Revenue Service, which details the 2025 exemption amount of $13.61 million and clarifies that estate tax is the responsibility of the estate.

Additional Reference: IRS Publication 559, "Survivors, Executors, and Administrators," 2024, Publication 559 (2024), Survivors, Executors, and Administrators | Internal Revenue Service, which explains that beneficiaries typically do not pay estate tax on inheritances.

[Cdj1040]

Everyone wants tax and investment strategies regardless of income and savings. If you have money to invest you are looking at the stock market, annuities, rental property, bonds, gold and more. It's just a smart thing to do. Money for travel and everything you want to do and a nice windfall for your heirs is all good if you can do it QUOTE=Aces4;2442783]Great article and I have to wonder why in the world would a couple making enough money from RMD's and investments that would create a larger tax bill for them, bother dodging the income taxes due. At most, they probably have 15 years left for their money to last and if their taxes would be that "hefty" there is plenty to live on for that period.

I feel some details must be missing.[/QUOTE]

[Cdj1040]

If you DO invest in a second property and eventually want to sell it you will have to pay Capital Gains tax on any profit unless you buy another property within a defined period.
My neighbor struggled with this, didn't really want another rental property after looking at houses here and just decided to pay the taxes on what he sold in the end.

[Cdj1040]

If you DO invest in a second property and eventually want to sell it you will have to pay Capital Gains tax on any profit unless you buy another property within a defined period.
My neighbor struggled with this, didn't really want another rental property after looking at houses here and just decided to pay the taxes on what he sold in the end.

[retiredguy123]

Originally Posted by Cdj1040

If you DO invest in a second property and eventually want to sell it you will have to pay Capital Gains tax on any profit unless you buy another property within a defined period.
My neighbor struggled with this, didn't really want another rental property after looking at houses here and just decided to pay the taxes on what he sold in the end.

I would add that, to avoid capital gains, you also need to pay someone to arrange a "like-kind" exchange. And, you need to pay taxes on any depreciation deductions that you were eligible for during the rental period, even if you didn't take the deductions.

[LonnyP]

Good thing is that we are all older and that 3 Trillion in additional debt won't matter to us.

[jrref]

You are not going to get around the RMD, just pay the tax. The only thing you can do is donate some of your distributions to a qualified charity like a church. That portion of the RMD will not be taxed. Look at it this way, if you give money to your church or synagogue or any religious organization, instead of writing them a check from your checking account, take the same amount and send it to them from your distribution. You have to be over 70 to do this.

[rsmurano]

The OP should listen to all responses instead of barking about them. Coach gave a good response, like it or not.
IMO, I think it’s crazy to own any rental especially at our age. I want to coast/have fun in my retirement, not be a slave to renters at all hours. As another poster indicated, when you get tired of being a landlord, your gains will be taxed heavily unless you buy “like” property.
I was a landlord 4 decades ago and learned my lesson. Got out of it within a few years and I got taxed when I got out.
All my friends who held rentals during 2007 downturn, their values of each unit dropped 50%, was still paying the same property taxes, under water in mortgage, insurance, and had no buyers that wanted them. When dealing with stocks, it take seconds to sell or do trailing stop losses so you don’t need to continue watching them.
When the BBB gets implemented, you won’t be paying taxes on your Social Security income which will save you money.

[Haggar]

Originally Posted by djmdawson

Need info on new BBB in congress from Trump. Wife and I are in the 70's. This is the first year of both getting RMD's and this will push income up big time.

Is there any benefit of owning a 2nd rental home from a tax perspective and what are the tax limits for eliminating the potential savings. IE, what is the income limit when you do not get to deduct losses?

I plan on using Turbo Tax or a tax guy but want the experience from someone who has a 2nd rental home.

DJ

I get this question a lot. And my answer to my clients is this.

First look at the purchase as an investment. Is is going to make money - taking into account the cash flow? If it loses money will the appreciation be greater than the money lost.

One doesn't want to lose $100 to save $20.

I get a similar question about buying equipment to get a tax deduction - And the answer is not if you don't need the equipment.

The building part of the rental property is written off at approximately 4% a year - not the land. The principal part of any loan payment is not tax deductible. Accordingly cash flow may be different than the tax profit or loss.

If you lose money the loss may or may not be tax deductible depending on your adjusted gross income. If it is not deductible in a particular year it is carried forward until a profitable year or fully deducted when the property (or a replacement property) is sold.

The gain is calculated by taking the original cost and improvements less depreciation allowable against the sale price less related sales expenses. This gain is taxed at the capital gains if the property is held more than one year. A loss is deductible against other capital gain income. Net maximum losses in a year can be deducted up to $3,000 a year. Any excess CG loss is carried forward.

If you move into a rental property and live ii it as a principal residence for two of the five years prior to sale you may escape capital gains. This works as well if you live in a house, convert it to a rental and sell within three years of having the house qualify as your primary residence for the required time.

Summary - buy a house for rent only if it makes economic sense.

[Haggar]

Originally Posted by djmdawson

Need info on new BBB in congress from Trump. Wife and I are in the 70's. This is the first year of both getting RMD's and this will push income up big time.

Is there any benefit of owning a 2nd rental home from a tax perspective and what are the tax limits for eliminating the potential savings. IE, what is the income limit when you do not get to deduct losses?

I plan on using Turbo Tax or a tax guy but want the experience from someone who has a 2nd rental home.

DJ

If you give charity look at making QCD's- Qualified Charitable Distributions directly from your IRA. This reduces the taxable portion of your RMD. In effective getting a tax deduction for charitable contributions.

[retiredguy123]

Originally Posted by Haggar

I get this question a lot. And my answer to my clients is this.

First look at the purchase as an investment. Is is going to make money - taking into account the cash flow? If it loses money will the appreciation be greater than the money lost.

One doesn't want to lose $100 to save $20.

I get a similar question about buying equipment to get a tax deduction - And the answer is not if you don't need the equipment.

The building part of the rental property is written off at approximately 4% a year - not the land. The principal part of any loan payment is not tax deductible. Accordingly cash flow may be different than the tax profit or loss.

If you lose money the loss may or may not be tax deductible depending on your adjusted gross income. If it is not deductible in a particular year it is carried forward until a profitable year or fully deducted when the property (or a replacement property) is sold.

The gain is calculated by taking the original cost and improvements less depreciation allowable against the sale price less related sales expenses. This gain is taxed at the capital gains if the property is held more than one year. A loss is deductible against other capital gain income. Net maximum losses in a year can be deducted up to $3,000 a year. Any excess CG loss is carried forward.

If you move into a rental property and live ii it as a principal residence for two of the five years prior to sale you may escape capital gains. This works as well if you live in a house, convert it to a rental and sell within three years of having the house qualify as your primary residence for the required time.

Summary - buy a house for rent only if it makes economic sense.

Question: If you move into a rental property that has appreciated before you moved in, can you escape the capital gains that occured before you moved in? And, what about the depreciation deductions that you took while the property was a rental property? Do you need to recapture these?

[Villagesgal]

Originally Posted by djmdawson

Hmm. Appreciate the info but must admit, not much help saying "pay your taxes" and suck it up cause you have 15 years left on earth anyways. Not really answering anything and not clearly from someone with experience, so I will put this "rarified" non-advice where it belongs, in the toilet.

For God's sake, YOU asked on an open forum, what kind of answers did you expect to get from people who are not financial experts. Make an appointment and speak with a tax accountant, cpa or financial planner, someone who's actually versed in such things.

[Aces4]

Good luck with rentals and filling your coffers.

[Haggar]

Originally Posted by retiredguy123

Question: If you move into a rental property that has appreciated before you moved in, can you escape the capital gains that occured before you moved in? And, what about the depreciation deductions that you took while the property was a rental property? Do you need to recapture these?

Generally, you cannot entirely escape capital gains tax on the appreciation of a rental property by simply converting it to a primary residence. However, converting your rental property to your primary residence and meeting certain requirements can allow you to exclude a portion of the capital gains when you eventually sell it.

[Stu from NYC]

The older I get the simpler I want my investments to be.

Putting funds in no load mutual funds with a good consistent track record does it for me.