No, I do not cheat on my taxes. That being said, I do try to take every legal deduction. And I 1099 my contractors.

I have also known LLs who claim they never buy toilet paper or light bulbs for their homes -- they all buy it under their rentals. The person who told me this was a nurse married to an anesthesiologist, who was already making well into the 6 figures in the 1990s. They divorced a few years later, as it was more than his taxes he was cheating on.

Once a cheat, always a cheat.

This is kinda funny because it seems like around here those that complain the most that schools are underfunded are the ones who are tagging their vehicles out of state, don't own property & pay no property tax, basically do everything they can to avoid paying any kind of tax including not working.

Tax laws aren't like laws against murder, rape, or theft. It has no basis in universal right or wrong, it is simply a law passed in a democracy. It may be illegal, but it's certainty not immoral.

And I take the view that tax laws are, like other laws, only bad to break in as far as the IRS can nab you for it, and even then only as bad as the penalties would be. (Robert J has told stories of tenants snitching on the IRS claiming he didn't report his rental income, that is evidence)

I record and report all my income and expenses accurately. I do work to track and claim all available deductions, but I do not under-report income or over-report expenses.

I have found that many, many people do this. It sometimes makes me feel like the chump reporting every penny.

I have used a light bulb or cleaning supply billed to the rentals on occasion but that's about the extent of it. Then again I rent out 2/3rds of my residence and claim all the income but only 2/3rds of the expenses. I find several missed receipts each year so it still balances out in the IRS's favor. I 1099 everyone I'm supposed to as well.

Nope, my account's bookkeeper tracks all my transactions and has a spreed sheet for each house.. All subs are 1099 or they don't do any work for me. I would not want that liability. Agree with what Sid said.

If federal taxes were collected through a VAT tax instead of on income, then the tax cheats would be paying tax.

I suspect that a substantial number of trades people do many, if not all, of their side jobs for cash.

Paulio, good point.

In my area non-owner occupied owners are treated grossly unfairly from a property tax stance. As an example I remember one year my taxes on a 800 sq.ft. 2/1/1 were $1800. The owner occupied house next door, a 1200 sq ft. 3/1/1 property taxes were $800.

So I'm not feeling too sorry for my county losing out on a permit fee here and there. Especially when the requirements are over the top. Can't replace a fence section without a permit or one window. Not to mention the process for obtaining it and then having to waste an eight hour day hanging out for an inspector who is pretty much worthless come to do the final inspection. So for some things like a roof or whole air conditioner, it makes sense. Other things, I'll take my chances. I can't very well leave a tenant for several days without a toilet or water heater. They don't work for our benefit.

"The difference between tax avoidance and tax evasion is the thickness of a prison wall"

I don't have to cheat on my taxes, they are so complicated that when being audited, the IRS get's it wrong the first 2 out of three times....

Now, Homer my friend,...did you really expect someone here would actually confess to cheating on their income and taxes? This is one of those posts I always wanted to make but just didn't have the nerve to post it. Glad it was you and not me.

Many years ago, I once heard a statistic that if every American reported their true income and paid every dime in taxes they actually owed,...there would enough money to pay-off the multi-trillion dollar national debt.

I will admit that I report all of my rental income. It is painful, but I do it. Like Deanna, I only want one set of facts to deal with. Besides, I am not a very good liar.

Paulio, I think there's more at stake with the Feds than local municipalities.

All of my business stuff is ran through QB, reviewed by the book keeper and finalized by my accountant.

I report all income for another reason too. My bank wants to see high income, so it behooves me to report it.

Actually, the only thing that really confuses me are meals.

I expense out meals when I eat out while working on rentals. Some people say no. Some people say yes. Some people say if it's under a certain amount, then it's fine.

Our CPA looks to find and take every deduction we legally qualify for under the law. I don't want to pay one penny more in taxes than I have to. And as RE investors, there are a lot of legal deductions not available to ordinary W-2 income earners. So to deliberately hide income or lie about expenses? I couldn't sleep at night for worry of retribution.

Oh, to collect rents and not pay taxes on them! Yes, that would be wonderful. But since I have a perspective that extends beyond this life, the short-term benefit is FAR outweighed by the eternal downside.

David MI, More "like them" not paying their fair share.....

Not more "of them"

I didn't mean to be unclear.

Owner occupied the way it's done in our area is grossly unfair.

LisaFL,

I noticed a similar phenomenon with the utility company. They have "business" rates vs. "residential rate".

Businesses have costs which they must exceed with revenues, or they go out of business. Where does the revenue come from? Their customers! It's sort of silly to boost rates on businesses because the customers end up paying it anyway. The same is true with your rental taxes. You have to raise rates to cover the taxes, which will be paid--ultimately--by the renter.

I get a chuckle when folks say, "If you rent it's the land lord who has to pay the taxes, maintenance, and insurance." Maybe that is true for a land lord who hasn't got enough sense to run a profitable investment, but I "bake" the costs of all three of those item (plus CapEx, lawn care, compliance with city rules and ordinances, management, income taxes, and profit margin) into my rents. My renters do pay all of those charges, just not line item by line item.

Same folks talk about how $15/hour wages will "help" the poor. Clearly they never passed high school level Economics. $15/hour minimum wage helps ME, because I rent to minimum wage renters, often. I will absolutely raise my rents not only to cover the increased expenses of my labor and supplies, but also because there will be more people running around with a lot more money...so charge 'em whatever the market will bear. I'd love to raise my $600/month rents to $750-$900/month, and I would too! Pay off my mortgages with artificially inflated rents!

Try to explain this to a person who claims to be politically progressive and favors rapid, significant minimum wage increases. Watch their heads slowly start to melt as the implications for all of it sets in.

I find it easier and cheaper to pay the tax than to try and wiggle around it.

We had a simple error on a return but the fines, penalties, 6!! hours on hold, letters back and forth, they never could find the check they signed for...all over a $600 math error.

My solution: make more money.

Make enough money you don't care how big the tax bill is.

I now pay more in income tax, even after all the legit RE deductions, than I used to gross on my job.

In MI, the term for lower prop taxes on owner occupied property is PRE, Principle Residence Exemption. Which perfectly clarifies the point , to provide an exemption from regular property tax rates. It provides encouragement for people to buy their own homes.

We don't. I actually got into an argument with a tax accountant when he took the $250 teacher's deduction for us when we had not given him any receipts (hubby didn't have any expenses that year). "But he's a teacher, and it's a gimmee - they (IRS) never ask for those receipts!" he said. Last time I used him to do my taxes!

I hope I am not cheating on my taxes. I wish I could come out with a certain specific answer. My tax return is over 500 pages in size. If I would give the same facts and data to 10 CPAs, I would come up with 10 different answers. There is a problem with that.

I do use strategies to lower my tax obligation, but I don't call that cheating. It is business planning. I just wish the standards were easier to understand even by the experts, because they can't agree on a best final tax number for me.

I am glad to see the system get overhauled, but I don't know if it will mean my final tax number is more exact. I wish it was