No landlord would pay more than necessary for utilities or other operating expenses for a rental property. Yet millions of owners pay more taxes on their rental earnings than they need to. Why?
Rental real estate provides more tax benefits than just about any other investment.
Each year, millions of landlords pay more taxes on their rental revenue than they need to. Why? Because they fail to take advantage of all of the tax deductions available for owners of rental property. Cash-flow real estate provides more tax benefits than pretty much any other investment.
Frequently these benefits make the greatest difference between losing money and earning a profit on a rental property. Here are the top ten tax deductions for owners of residential rental property:
1. Interest
Interest is sometimes a landlord's single largest deductible expense. Common instances of interest that landlords can take include mortgage loan payments on loans used to procure or improve rental property and interest on cards for goods or services utilized in a rental activity.
2. Depreciation
The actual value of a house, apartment building, or other rental property isn't completely deductible in the year in which you pay for it. As an alternative owners get back the cost of real-estate through depreciation. This implies taking a little of the cost of the property over one or two years.
3. Repairs
The cost of repairs to income property (provided the repairs are ordinary, necessary, and reasonable in amount) are totally deductible in the year in which they're sustained. Excellent 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 deduction whenever they drive anywhere for their rental activity. As an example, 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 take your travel expenses.
If you drive a vehicle, SUV, lorry, pickup, or panel truck for your rental activity (as most owners do), you have 2 options for deducting your auto costs. You can:
- subtract your exact expenses (gasoline, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To be accepted for the standard mileage rate, you should use the standard mileage technique the first year you employ a auto for your business activity. Moreover, you can?t use the standard mileage rate if you have claimed sped up depreciation reductions in prior years, or have taken a Section 179 deduction for the auto.
5. Long Distance Travel
If you travel overnite for your rental activity, you can take your airline fare, hotel bills, meals, and other costs. If you plan your journey thoroughly, you can even mix landlord business with pleasure and still take a reduction.
However , IRS auditors closely size up kickbacks for overnite travel? And many taxpayers get caught claiming these repayments without proper records to back them up. To remain in the law (and avoid unwelcome attention from the IRS), you want to correctly document your long-distance travel costs.
6. Home-based Office
Provided they meet certain nominal requirements, owners may take their home office costs from their taxable revenue. This deduction applies not only to space devoted to office work, and additionally to a workshop or any other home workspace you use for your rental business. This happens to be true whether you own your home or house or are a renter.
7. Staff and Independent Contractors
Whenever you hire anybody to perform services for your rental activity, you can subtract their salary as a rental business expense. This is so whether the worker is an employee (for instance, a resident chief) or an independent contractor (as an example, a fix person).
8. Casualty and Theft Losses
If your rental property is damaged or devastated from a unexpected event like a fire or flood, you might possibly be able to obtain a tax reduction for all or part of your loss. These kinds of losses are called casualty losses. You often won't be able to deduct the entire value of property damaged or demolished by a casualty. How much you will take relies upon what quantity of your property was demolished and whether the loss was covered by insurance.
9. Insurance
You can subtract 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 liability insurance. And if you have workers, you can subtract the cost of their health and workers? Compensation insurance.
10. Legal and Professional Services
Eventually,. You can take charges that you pay to lawyers, accountants, property management firms, real-estate investment consultants, and other execs. You can take these costs as operating costs as long as the charges are paid for work related to your rental activity.
Did You Know?
Were you aware that:
- Owners can increase the depreciation reductions they receive the initial few years they own rental property by using segmented depreciation.
- Considered planning can allow you to take, in a single year, the cost of improvements to rental property that you may instead have to take over 27.5 years.
- You can rent out a vacation home tax-free, in a few cases.
- Most little owners can take up to $25,000 in rental property losses each year.
- A special tax rule authorizes some owners to take 100% of their rental property losses every year, no matter how much.
- Folk who hire property to their family or friends can lose virtually all their tax rebates.
If you didn't know any of these facts, you might be paying far more tax than you need to. As usual, be sure to talk with your tax confidant or tax pro.
[Author's note: View our new Better Business Bureau review.]
Rental real estate provides more tax benefits than just about any other investment.
Each year, millions of landlords pay more taxes on their rental revenue than they need to. Why? Because they fail to take advantage of all of the tax deductions available for owners of rental property. Cash-flow real estate provides more tax benefits than pretty much any other investment.
Frequently these benefits make the greatest difference between losing money and earning a profit on a rental property. Here are the top ten tax deductions for owners of residential rental property:
1. Interest
Interest is sometimes a landlord's single largest deductible expense. Common instances of interest that landlords can take include mortgage loan payments on loans used to procure or improve rental property and interest on cards for goods or services utilized in a rental activity.
2. Depreciation
The actual value of a house, apartment building, or other rental property isn't completely deductible in the year in which you pay for it. As an alternative owners get back the cost of real-estate through depreciation. This implies taking a little of the cost of the property over one or two years.
3. Repairs
The cost of repairs to income property (provided the repairs are ordinary, necessary, and reasonable in amount) are totally deductible in the year in which they're sustained. Excellent 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 deduction whenever they drive anywhere for their rental activity. As an example, 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 take your travel expenses.
If you drive a vehicle, SUV, lorry, pickup, or panel truck for your rental activity (as most owners do), you have 2 options for deducting your auto costs. You can:
- subtract your exact expenses (gasoline, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To be accepted for the standard mileage rate, you should use the standard mileage technique the first year you employ a auto for your business activity. Moreover, you can?t use the standard mileage rate if you have claimed sped up depreciation reductions in prior years, or have taken a Section 179 deduction for the auto.
5. Long Distance Travel
If you travel overnite for your rental activity, you can take your airline fare, hotel bills, meals, and other costs. If you plan your journey thoroughly, you can even mix landlord business with pleasure and still take a reduction.
However , IRS auditors closely size up kickbacks for overnite travel? And many taxpayers get caught claiming these repayments without proper records to back them up. To remain in the law (and avoid unwelcome attention from the IRS), you want to correctly document your long-distance travel costs.
6. Home-based Office
Provided they meet certain nominal requirements, owners may take their home office costs from their taxable revenue. This deduction applies not only to space devoted to office work, and additionally to a workshop or any other home workspace you use for your rental business. This happens to be true whether you own your home or house or are a renter.
7. Staff and Independent Contractors
Whenever you hire anybody to perform services for your rental activity, you can subtract their salary as a rental business expense. This is so whether the worker is an employee (for instance, a resident chief) or an independent contractor (as an example, a fix person).
8. Casualty and Theft Losses
If your rental property is damaged or devastated from a unexpected event like a fire or flood, you might possibly be able to obtain a tax reduction for all or part of your loss. These kinds of losses are called casualty losses. You often won't be able to deduct the entire value of property damaged or demolished by a casualty. How much you will take relies upon what quantity of your property was demolished and whether the loss was covered by insurance.
9. Insurance
You can subtract 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 liability insurance. And if you have workers, you can subtract the cost of their health and workers? Compensation insurance.
10. Legal and Professional Services
Eventually,. You can take charges that you pay to lawyers, accountants, property management firms, real-estate investment consultants, and other execs. You can take these costs as operating costs as long as the charges are paid for work related to your rental activity.
Did You Know?
Were you aware that:
- Owners can increase the depreciation reductions they receive the initial few years they own rental property by using segmented depreciation.
- Considered planning can allow you to take, in a single year, the cost of improvements to rental property that you may instead have to take over 27.5 years.
- You can rent out a vacation home tax-free, in a few cases.
- Most little owners can take up to $25,000 in rental property losses each year.
- A special tax rule authorizes some owners to take 100% of their rental property losses every year, no matter how much.
- Folk who hire property to their family or friends can lose virtually all their tax rebates.
If you didn't know any of these facts, you might be paying far more tax than you need to. As usual, be sure to talk with your tax confidant or tax pro.
[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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