I am still a bit confused. I was not implying that whatever my straight-line depreciation expense was going to simply be refunded to me.
From my understanding (and please correct me where I am wrong), to estimate a property's annual tax liability:
Property's NOI, subtract the mortgage interest payments, subtract depreciation (1/39th if commercial office/industrial/retail, or 1/27.5 if apartments).
Whatever is left, apply the appropriate tax bracket, and that is what you would owe in taxes.
This assumes, however, that your NOI - Interest - Depreciation is a positive number.
So back to my question, what if it is a negative number? I.e. you don't owe any taxes. So whatever the negative amount is, multiplied by the tax bracket.....wouldn't that be technically a refund, similar to personal income taxes? And if not, how would the owner apply that "refund/credit" so that he derived some benefit? If he owned another property that he did owe taxes on, could he sorta combine the two to cancel out the taxes owed? What if he only owned the one property and had no other assets to shelter?
Jul 30, 2009