Question:
Lchvod Harav
- When figuring out maaser do I calculate after taxes?
- And how do I figure out my income on Real Estate investments? We get distributions but there is the depreciation factor.
Thank you in advance.
Answer:
Hello,
- Income tax is considered a business[1] expense, and can be deducted from your income. The reason is because income tax is taken by the government away from what you earned, therefore essentially you are earning less.
Regarding property tax[2], it depends which property it is for. Property tax on your home is like a home expense, such as food and clothing and cannot be deducted, as it is for the local government’s services, such as street lights water and sanitation services. However, the property tax on your business, would be considered a business expense, no different than the rent that is paid.
Sales tax on items personal items that were purchased, i.e. a suit, is not considered an expense, and this is included in the price you are paying for the item.
- The distributions understandably are considered income. Regarding the depreciation factor, is a loss, however there is controversy among the poskim, when they are to be deducted. Some poskim say[3] that they are deducted after the item is sold, by taking the price that was paid for it, minus the price that it was sold, and that is the loss. Others[4] say that the loss can be taken off yearly. This controversy is understandable regarding the depreciation of a car, where the real value of the car automatically goes down. However, regarding real estate, although the walls are not as clean, the pipes and wires are older, however it is still very possible that the total value of the property actually went up, due to a higher demand for that area. Therefore, with real estate, the depreciation should be taken off only after the property is sold, if indeed the property was sold for a lower price.
Best wishes
Sources:
[1] אג"מ יו"ד ס' קמ"ג, וכן באורח צדקה פי"ב אות י"ז בשם רש"ז, ור' אלישיב זצ"ל.
[2] אג"מ שם, וכן באורח צדקה שם אות ה' בשם רש"ז ר' ווזנר זצ"ל.
[3] ר' משה פיינשטיין זצ"ל הובא בס' מעשר כספים בסוף הס' עמ' כ"ו.
[4] מנחת יצחק ח"ה ס' ל"ד אות ג', וכן רש"ז אוירבך זצ"ל בקונ' קול נתורה חוברת ל"ט שאלה ט'.
