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

How the FairTax pertains to rental property.

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.

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Comment by Marvin on December 24, 2011 at 1:38pm: Did you think about this

Another reason we need the Fair Tax, Here in Las Vegas on any given day there are 470 add's in the local paper, rooms for rent, room mates, room in my home, It's the same in any town or city throughout the United States.

My point is ---- These rooms are rented out and paid for in cash (97%) of the time, that's not all bad (for the home owner) because it's tax free money, not reported as income to the I.R.S same is true for drug dealers. Millions of dollars that goes reported as income.

The Fair Tax would take care of all that foolishness. Keep up the good work. Marvin

Comment by Joe McCune on April 9, 2010 at 9:08pm: Since I am not a landlord, and may or may not know what I'm talking about, here is my opinion. You would remit 23% of your collected rents to the FairTax collection agency. That would be the extent of your federal tax liabilities. As far as saving the taxes on services, if you have a plumber come to your personal residence and unstop a commode, and he charges you $100, then that same job at one of your rental properties would only cost $77.

Comment by Judy O'Hare on April 6, 2010 at 6:00pm: So, we've already taken some of the depreciation for the property, there would be no recapture of that when the house is sold, right? Also, 23% of the rents that we take in now would be taxed? How would the taxes on services be saved if the prices will stay the same as before the FT? (Are you saying there is no tax on services--I guess I'm confused) This would be a lot easier to understand if our Schedule E were broken down. Do you see a disadvantage of being a landlord?