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

How would Fair Tax affect Landlords

We have rentals and are wondering how FT would affect our bottom line? I know we would have to pay the 23% but what would happen to the rest of our deductions. As you know we take a deduction for the interest & a deduction for depreciation. The depreciation is recaptured at the time of the sale.of the property so it's not really a deduction. My spouse, always the skeptic, has prompted this question. Putting this on a personal basis makes it easier to explain the plan to others in the same situation.

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Permalink Reply by chiefcook on April 3, 2010 at 8:51pm

JAMES A. BAKER III INSTITUTE FOR PUBLIC POLICY; RICE UNIVERSITY

published this research report.

THE IMPACT OF H.R. 25 ON HOUSING AND THE HOMEBUILDING INDUSTRY

There is a section starting around page 30 that may give the answers you and your husband are looking for.

I hope this helps.

Attachments:

ImpactofHR25-TEPP.pdf, 2 MB

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Permalink Reply by Judy O'Hare on April 3, 2010 at 9:08pm

Thanks, It would possibly help if I could understand it. I'm a show me person & need a good example.

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Permalink Reply by D. L. Corder on April 5, 2010 at 11:27pm

I am also a Landlord and as I see it, there should be no FairTax on rental income, as that is income that is currently reported on the schedule E, using todays Income tax system. The deductions you talk about are deductions to income, including depreciation. Therefore, if the FairTax is enacted before one sells their depreciated real property, their should be no recapture on previous depreciation, again since that was a reduction to your earlier income. However, I may not be correct in my assumption, so I think this would be a good question to be better answered by Karen Walby, the chief economist of the FairTax organization. I will pursue getting both of us an answer to your valid question. The answer in Mr. Bakers publication is far beyond my understanding, so I hope Ms Walby can provide an answer that is written in layman's language.