How the FairTax pertains to rental property.
The consumption of residential housing services is taxable. In renter-occupied housing the tax is collected on a monthly basis and in owner-occupied housing, the tax is collected up front when the home is purchased for the first time.
The landlord is a seller of housing services. He/she must register with the state sales tax collection agency and file sales tax reports (probably quarterly for a person who owns only a few rentals).
As a seller of housing services, he/she must separately state the FairTax on the monthly rent bill (or in the rental or lease contract that the rent is a certain amount plus the FairTax amount).
The landlord collects the FairTax from the renter and remits it to the state sales tax collection agency.
So the renter (the consumer) pays the tax.
There are no taxes on businesses with the FairTax so there is no need for any deductions. There are no taxes of any kind on business income to deduct them from. Also there will be no taxes on any individual income.
When the landlord sells the apartment building, duplex, etc., there will be no capital gains taxes. The purchaser of this property, if they continue its use as a business property will not have to pay any FairTax on the purchase. Also the purchase of residential or commercial rental properties is not taxable. The consumption of residential services (housing services) is taxable.
The landlord will not have to pay any FairTax on services he/she purchases pursuant to running their rental property business. For example, they will pay no taxes on services they purchase from other businesses such as plumbers', painters', or lawncare services. This prevents there being embedded taxes in the rent the landlord has to charge the renter.
Karen Walby, Ph.D.