No landlord would pay more than needed for resources or other operating expenses for a rental property. Yet millions of owners pay more taxes on their rental earnings than they must. Why?
Rental property provides more tax benefits than pretty much any other investment.
Each year, millions of owners pay more taxes on their rental earnings than they should. Why? Because they fail to exploit all the tax rebates available for owners of rental property. Cash-flow real estate provides more tax benefits than just about any other investment.
Often , these benefits make the biggest difference between losing money and earning a decent profit on a rental property. Here are the most popular 10 tax rebates for owners of residential rental property:
1. Interest
Interest is commonly a landlord's single largest deductible cost. Common examples of interest that owners can take include mortgage interest payments on loans used to acquire or improve rental property and interest on credit cards for products or services used in a rental activity.
2. Depreciation
The particular price of a house, residence building, or other rental property is not fully deductible in the year in which you pay for it. As an alternative owners get back the cost of real estate through depreciation. This involves subtracting some of the price of the property over one or two years.
3. Repairs
The cost of repairs to income property (provided the repairs are normal, obligatory, and reasonable in amount) are fully deductible in the year in which they are incurred. Great examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing damaged windows.
4. Local Travel
Landlords have entitlement to a tax reduction whenever they drive anywhere for their rental activity. For instance, when you drive to your rental building to handle a tenant complaint or go to the appliance store to buy a part for a repair you can deduct your travel expenses.
If you drive an auto, SUV, wagon, pickup, or panel lorry for your rental activity (as most landlords do), you have two options for taking your vehicle costs. You can:
- subtract your tangible expenses (petrol, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To be accepted for the standard mileage rate, you need to use the standard mileage strategy the 1st year you employ a auto for your business activity. Furthermore, you can?t use the standard mileage rate if you have claimed accelerated depreciation reductions in previous years, or have taken a Section 179 deduction for the car.
5. Long Distance Travel
If you travel overnite for your rental activity, you can subtract your airfare, hotel bills, meals, and other costs. If you plan your trip carefully, you may also mix owner business with pleasure and still take a reduction.
But IRS auditors closely scrutinize deductions for overnight travel? And many taxpayers get caught claiming these deductions without correct records to back them up. To remain within the law (and avoid unwelcome attention from the IRS), you need to correctly document your long distance travel expenses.
6. Home Based Office
Provided they meet certain nominal necessities, owners may subtract their small office costs from their taxable earnings. This reduction applies not only to space dedicated to office work, but also to a workshop or any other home workspace you use for your rental business. This really is true whether you own your house or house or are a renter.
7. Employees and Independent Contractors
If you hire anyone to perform services for your rental activity, you can take their wages as a rental business expense. This is so whether the employee is an employee (for example, a resident executive) or an independent contractor (for example, a repair person).
8. Casualty and Burglary Losses
If your rental property is damaged or devastated from a sudden event like a fire or flood, you may be able to get a tax reduction for all or part of your loss. These types of losses are called casualty losses. You usually won't be well placed to deduct the entire cost of property damaged or annihilated by a casualty. How much you will subtract relies upon what proportion of your property was wrecked and whether the loss was included in insurance.
9. Insurance
You can take the premiums you pay for almost any insurance for your rental activity. This includes fire, burglary, and flood insurance for rental property, as well as owner culpability insurance. And if you have workers, you can take the cost of their health and employees? Compensation insurance.
10. Legal and Professional Services
Finally,. You can subtract charges that you pay to attorneys, accountants, property management companies, property investment consultants, and other professionals. You can take these costs as operating costs as long as the fees are paid for work related to your rental activity.
Did You Know?
Do you know that:
- Landlords can greatly increase the depreciation reductions they receive the initial few years they own rental property by using split depreciation.
- Careful planning can permit you to subtract, in a single year, the cost of improvements to rental property that you may instead have to subtract over 27.5 years.
- You can lease out a vacation home tax-free, in some cases.
- Most little landlords can deduct up to $25,000 in rental property losses every year.
- A special tax rule allows some owners to deduct 100% of their rental property losses each year, no matter how much.
- Folks who lease property to their family or pals can lose nearly all of their tax deductions.
If you didn't know any one of these facts, you could be paying much more tax than you want to. As always, be absolutely sure to check with your tax adviser or tax professional.
[Author's note: View our new Better Business Bureau review.]
Rental property provides more tax benefits than pretty much any other investment.
Each year, millions of owners pay more taxes on their rental earnings than they should. Why? Because they fail to exploit all the tax rebates available for owners of rental property. Cash-flow real estate provides more tax benefits than just about any other investment.
Often , these benefits make the biggest difference between losing money and earning a decent profit on a rental property. Here are the most popular 10 tax rebates for owners of residential rental property:
1. Interest
Interest is commonly a landlord's single largest deductible cost. Common examples of interest that owners can take include mortgage interest payments on loans used to acquire or improve rental property and interest on credit cards for products or services used in a rental activity.
2. Depreciation
The particular price of a house, residence building, or other rental property is not fully deductible in the year in which you pay for it. As an alternative owners get back the cost of real estate through depreciation. This involves subtracting some of the price of the property over one or two years.
3. Repairs
The cost of repairs to income property (provided the repairs are normal, obligatory, and reasonable in amount) are fully deductible in the year in which they are incurred. Great examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing damaged windows.
4. Local Travel
Landlords have entitlement to a tax reduction whenever they drive anywhere for their rental activity. For instance, when you drive to your rental building to handle a tenant complaint or go to the appliance store to buy a part for a repair you can deduct your travel expenses.
If you drive an auto, SUV, wagon, pickup, or panel lorry for your rental activity (as most landlords do), you have two options for taking your vehicle costs. You can:
- subtract your tangible expenses (petrol, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To be accepted for the standard mileage rate, you need to use the standard mileage strategy the 1st year you employ a auto for your business activity. Furthermore, you can?t use the standard mileage rate if you have claimed accelerated depreciation reductions in previous years, or have taken a Section 179 deduction for the car.
5. Long Distance Travel
If you travel overnite for your rental activity, you can subtract your airfare, hotel bills, meals, and other costs. If you plan your trip carefully, you may also mix owner business with pleasure and still take a reduction.
But IRS auditors closely scrutinize deductions for overnight travel? And many taxpayers get caught claiming these deductions without correct records to back them up. To remain within the law (and avoid unwelcome attention from the IRS), you need to correctly document your long distance travel expenses.
6. Home Based Office
Provided they meet certain nominal necessities, owners may subtract their small office costs from their taxable earnings. This reduction applies not only to space dedicated to office work, but also to a workshop or any other home workspace you use for your rental business. This really is true whether you own your house or house or are a renter.
7. Employees and Independent Contractors
If you hire anyone to perform services for your rental activity, you can take their wages as a rental business expense. This is so whether the employee is an employee (for example, a resident executive) or an independent contractor (for example, a repair person).
8. Casualty and Burglary Losses
If your rental property is damaged or devastated from a sudden event like a fire or flood, you may be able to get a tax reduction for all or part of your loss. These types of losses are called casualty losses. You usually won't be well placed to deduct the entire cost of property damaged or annihilated by a casualty. How much you will subtract relies upon what proportion of your property was wrecked and whether the loss was included in insurance.
9. Insurance
You can take the premiums you pay for almost any insurance for your rental activity. This includes fire, burglary, and flood insurance for rental property, as well as owner culpability insurance. And if you have workers, you can take the cost of their health and employees? Compensation insurance.
10. Legal and Professional Services
Finally,. You can subtract charges that you pay to attorneys, accountants, property management companies, property investment consultants, and other professionals. You can take these costs as operating costs as long as the fees are paid for work related to your rental activity.
Did You Know?
Do you know that:
- Landlords can greatly increase the depreciation reductions they receive the initial few years they own rental property by using split depreciation.
- Careful planning can permit you to subtract, in a single year, the cost of improvements to rental property that you may instead have to subtract over 27.5 years.
- You can lease out a vacation home tax-free, in some cases.
- Most little landlords can deduct up to $25,000 in rental property losses every year.
- A special tax rule allows some owners to deduct 100% of their rental property losses each year, no matter how much.
- Folks who lease property to their family or pals can lose nearly all of their tax deductions.
If you didn't know any one of these facts, you could be paying much more tax than you want to. As always, be absolutely sure to check with your tax adviser or tax professional.
[Author's note: View our new Better Business Bureau review.]
About the Author:
Marco Santarelli
is an investor, author and founder of Norada Real Estate Investments -- a
nationwide real estate investment firm providing turnkey investment property in
growth markets around the United States. For more articles like Top Ten Tax Deductions for Landlords,
please visit our Real Estate
Investing Blog where it was originally published.
is an investor, author and founder of Norada Real Estate Investments -- a
nationwide real estate investment firm providing turnkey investment property in
growth markets around the United States. For more articles like Top Ten Tax Deductions for Landlords,
please visit our Real Estate
Investing Blog where it was originally published.
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