Taxes You'll Pay for Owning Rentals in San Diego

Taxes You’ll Pay for Owning Rentals in San Diego

If you own a rental home in San Diego, what taxes are you responsible for?

First you must know what Real estate withholding is. Withholding is a pre-payment of California state income tax for any seller owning CA rental property. Escrow companies must collect (withhold) 3.33% of the seller’s proceeds at the close of escrow and send it to the FTB. Withholding is not applicable if you do a 1031 exchange.

There are also tax implications for those owning a rental home who must short sale their rental, or if the rental is foreclosed on. The tax liability is calculated using the loan amount that is written-off for the seller.

If you own a rental in San Diego, how is rental income taxed?

As of Jan 1, 2010, property managers must withhold 7% of all income that exceeds $1,500. This applies to CA properties owned by non-residents only and the withholding is sent to the FTB on behalf of the non-resident owner, unless that owner qualifies for reduced or waived withholding.

Contact the Franchise Tax Board, www.ftb/ca.gov, or your CPA for more details.