Comments on: How we ignored the tax variable in our investment calculations and screwed up for the next 19 years http://www.shortoncashflow.com/how-we-ignored-the-tax-variable-in-our-investment-calculations-and-screwed-up-for-the-next-19-years/ Learn from our financial failures Tue, 06 Jul 2010 16:01:20 -0400 http://wordpress.org/?v=2.8 hourly 1 By: François http://www.shortoncashflow.com/how-we-ignored-the-tax-variable-in-our-investment-calculations-and-screwed-up-for-the-next-19-years/comment-page-1/#comment-2584 François Thu, 27 Aug 2009 09:46:48 +0000 http://www.shortoncashflow.com/?p=129#comment-2584 Hi Sally, When I'm saying you can write-off the investment, I mean the price you paid for the property + works costs + furnitures prices. This has nothing to do with the loan; you could do it even if you had no loan. The rules to do that are fairly complicated, and sometimes questionned by the tax office. This is why you need an accountant. François. Hi Sally,
When I’m saying you can write-off the investment, I mean the price you paid for the property + works costs + furnitures prices. This has nothing to do with the loan; you could do it even if you had no loan. The rules to do that are fairly complicated, and sometimes questionned by the tax office. This is why you need an accountant.
François.

]]> By: Sally http://www.shortoncashflow.com/how-we-ignored-the-tax-variable-in-our-investment-calculations-and-screwed-up-for-the-next-19-years/comment-page-1/#comment-2568 Sally Wed, 26 Aug 2009 09:40:52 +0000 http://www.shortoncashflow.com/?p=129#comment-2568 Wow, see I thought that furnished rental was kind of a mistake (I discuss it in a later post this week, feel free to comment) whereas in your experience it's the best tax option. You say you can write off the investment: you mean loan interests and capital amortization, right? Because according to the accountant we talked to last March, since we bought in our own name instead of in the name of a company (like SCI), the capital we pay back is not deductible. Thanks for clearing up the changes in the law. I knew about the change in percentage in the micro-BIC plan. I don't really get it though. You would think that in the current crisis they would try to relieve the tax burden off investors, not make it heavier. I know that you are not allowed to change tax plan easily. I hope they still let me though (I'll try). I think it's two years, not three, but maybe that's another change in the tax law. One of my next post will actually deal with our dilemma choosing our tax plan for this year. I'm going to send you the accountant's contact info by email. Wow, see I thought that furnished rental was kind of a mistake (I discuss it in a later post this week, feel free to comment) whereas in your experience it’s the best tax option. You say you can write off the investment: you mean loan interests and capital amortization, right? Because according to the accountant we talked to last March, since we bought in our own name instead of in the name of a company (like SCI), the capital we pay back is not deductible.

Thanks for clearing up the changes in the law. I knew about the change in percentage in the micro-BIC plan. I don’t really get it though. You would think that in the current crisis they would try to relieve the tax burden off investors, not make it heavier.

I know that you are not allowed to change tax plan easily. I hope they still let me though (I’ll try). I think it’s two years, not three, but maybe that’s another change in the tax law. One of my next post will actually deal with our dilemma choosing our tax plan for this year.

I’m going to send you the accountant’s contact info by email.

]]> By: Francois http://www.shortoncashflow.com/how-we-ignored-the-tax-variable-in-our-investment-calculations-and-screwed-up-for-the-next-19-years/comment-page-1/#comment-2554 Francois Tue, 25 Aug 2009 19:59:39 +0000 http://www.shortoncashflow.com/?p=129#comment-2554 I’m sorry I didn’t see your reply earlier… so, here is a very late answer. Yes, I’m a real investor too. I bought two 1 bedroom flats in Paris, and I’m renting them furnished, medium-term contracts. I compared all the tax options, before choosing non professional leaser, furnished rental, simplified actual profits. This is the more complicated tax option, but the more interesting as you can write off your investment. You cannot do it with “micro-foncier” or non-furnished rental. Interests and agios are similar, although interests are within the scope of a regular loan, while you pay agios when your bank account is in the red. A few things have changed in 2009 for taxes: - to be a professional leaser, you need to earn 23 000 € from the rental, AND this should be more than 50% of your total income. (before, it was “and / or”) So, now very few people can be professional leaser. The only advandages being the national health insurance, and, after 5 years of activity, no taxes to pay if you sell a property higher than the price you bought it. But you have to prove it was not speculation… - micro-BIC is less interesting now, as you are taxed on approximatively 50%, and not the light 29% like in the past. Your accountant is cheap. Mine is 800€ before taxes for 2 properties. Could you give me hiq contact details ? Also, note that you cannot swith from one tax option to another one when you like it. There are some constrainsts; I believe you need to keep one option for at least 3 years. I’m not sure; your accountant should be able to confirm. François. I’m sorry I didn’t see your reply earlier… so, here is a very late answer.

Yes, I’m a real investor too. I bought two 1 bedroom flats in Paris, and I’m renting them furnished, medium-term contracts. I compared all the tax options, before choosing non professional leaser, furnished rental, simplified actual profits. This is the more complicated tax option, but the more interesting as you can write off your investment. You cannot do it with “micro-foncier” or non-furnished rental.

Interests and agios are similar, although interests are within the scope of a regular loan, while you pay agios when your bank account is in the red.

A few things have changed in 2009 for taxes:
- to be a professional leaser, you need to earn 23 000 € from the rental, AND this should be more than 50% of your total income. (before, it was “and / or”) So, now very few people can be professional leaser. The only advandages being the national health insurance, and, after 5 years of activity, no taxes to pay if you sell a property higher than the price you bought it. But you have to prove it was not speculation…
- micro-BIC is less interesting now, as you are taxed on approximatively 50%, and not the light 29% like in the past.

Your accountant is cheap. Mine is 800€ before taxes for 2 properties. Could you give me hiq contact details ?

Also, note that you cannot swith from one tax option to another one when you like it. There are some constrainsts; I believe you need to keep one option for at least 3 years. I’m not sure; your accountant should be able to confirm.

François.

]]> By: Sally http://www.shortoncashflow.com/how-we-ignored-the-tax-variable-in-our-investment-calculations-and-screwed-up-for-the-next-19-years/comment-page-1/#comment-47 Sally Wed, 04 Mar 2009 11:33:37 +0000 http://www.shortoncashflow.com/?p=129#comment-47 François, thank you very much for your comment. Do you have by any chance a strong background in accounting or do you happen to be a real estate investor too? The reason I'm asking is that you seem to have experience in the field of tax returns. Your comment about loan interests made me reconsider the whole tax thing all over again and I realized I might have got confused before: are interests and agios the same thing? Anyway, I'm going to write a post about that and your view is obviously welcome! Thanks again and please keep commenting! François, thank you very much for your comment. Do you have by any chance a strong background in accounting or do you happen to be a real estate investor too? The reason I’m asking is that you seem to have experience in the field of tax returns.

Your comment about loan interests made me reconsider the whole tax thing all over again and I realized I might have got confused before: are interests and agios the same thing? Anyway, I’m going to write a post about that and your view is obviously welcome!

Thanks again and please keep commenting!

]]> By: François http://www.shortoncashflow.com/how-we-ignored-the-tax-variable-in-our-investment-calculations-and-screwed-up-for-the-next-19-years/comment-page-1/#comment-45 François Tue, 03 Mar 2009 07:30:10 +0000 http://www.shortoncashflow.com/?p=129#comment-45 Your loan payments are not legitimate expenses, but the loan interests are. So, maybe you should check again whether it's worthwhile using actual profits declaration. It's not that complicated; and even if you have to pay 600€ the first year so that your accountant can explain to you how to do it, you can easily do it yourself the following years. François. Your loan payments are not legitimate expenses, but the loan interests are. So, maybe you should check again whether it’s worthwhile using actual profits declaration. It’s not that complicated; and even if you have to pay 600€ the first year so that your accountant can explain to you how to do it, you can easily do it yourself the following years.
François.

]]>