Replace All Federal Taxes on Income with the Fair Tax Act , HR 25 and S 122

FairTax and rent on Apartments

Sooner or later someone will ask me how the FairTax will affect rent on apartments. Landlords will pay the FairTax, right? What's the embedded tax right now on apartment rent? I doubt it's as high as 23 percent. I assume rents will go up slightly, right?

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Permalink Reply by Chip Spradley on February 13, 2012 at 10:40pm

As a landlord of houses for 30 years, I think the rent will stay the same (with no over due rent increases) or drop.

Prices of materials for repair/replacement have increased a lot and will continue to increase but there will will be no rent increases which are due. Competition will dictate the price. I will be happy because last year I spent over 3 weeks being jerked around by the tax code and I still paid a tax accountant big money. And I have never been audited!! For 25 years I have met monthly with other landlords and we discuss everything, so I get a lot of input.

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Permalink Reply by John Wesley Nobles on February 19, 2012 at 3:45pm

Tenants will pay the tax, but landlords will collect it monthly and pass it on. The exclusive rate will be approximately 30% which will be inclusive 23%. How much rents may go up seems to be the $64,000 question. Many factors will affect the landlords pricing. This is an area of HR 25 that has received and continues to receive a lot of discussion. The effect of embedded taxes in the pricing structure is still being discussed and debated. As a landlord of houses for over 40 years I am not sure. With my current rentals I think it will just be necessary to add on the 30% to cover the taxes I will have to forward. I am retired and never have been audited. My tax liability is very low under the current system. Bear in mind that a lot of variables have to be considered, but as always competition will determine price. I would expect there will be considerable discussion in congress before passage.