No owner would pay more than needed for resources or other operating costs 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 pretty much any other investment.
Every year, millions of owners pay more taxes on their rental earnings than they need to. Why? Because they fail to milk 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.
Often , these benefits make the biggest difference between losing money and earning a profit on a rental property. Here are the top ten tax repayments for owners of residential rental property:
1. Interest
Interest is often a landlord's single largest deductible cost. Common instances of interest that owners can subtract include mortgage interest charges on loans used to procure or improve rental property and interest on cards for products or services used in a rental activity.
2. Depreciation
The actual price of a place, loft building, or other rental property is not completely deductible in the year in which you pay for it. Instead , owners get back the cost of real estate through depreciation. This means deducting a little of the cost of the property over a few years.
3. Repairs
The price of repairs to income property (provided the repairs are standard, obligatory, and reasonable in amount) are totally deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.
4. Local Travel
Landlords have entitlement to a tax deduction whenever they drive anywhere for their rental activity. For instance, when you drive to your rental building to deal with a tenant complaint or go to the hardware store to purchase a part for a repair you can subtract your travel expenses.
If you drive a car, SUV, wagon, pickup, or panel truck for your rental activity (as most owners do), you have two options for subtracting your vehicle expenses. You can:
- take your exact expenses (gas, 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 strategy the first year you employ a car for your business activity. Furthermore, 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 reduction for the vehicle.
5. Long-haul Travel
If you travel overnite for your rental activity, you can deduct your airline fare, hotel bills, meals, and other expenses. If you plan your trip thoroughly, you may also mix owner business with pleasure and still take a deduction.
However , IRS auditors closely size up kickbacks for overnight travel? And many taxpayers get caught saying these reductions without correct records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to properly document your long haul travel costs.
6. Home Based Office
Provided they meet certain nominal wants, landlords may subtract their small office costs from their taxable revenue. This reduction 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 is true whether you own your house or house or are a renter.
7. Staff and Independent Contractors
If you hire any person to perform services for your rental activity, you can deduct their wages as a rental business cost. This is so whether the employee is a worker (for instance, a resident executive) or an independent contractor (for instance, a fix person).
8. Casualty and Theft Losses
If your rental property is damaged or wiped out from a unexpected event like a fire or flood, you may just be able to obtain a tax deduction for any part of your loss. These sorts of losses are called casualty losses. You usually won't be in a position to subtract the entire cost of property damaged or annihilated by a casualty. How much you may deduct depends on what proportion of your property was wrecked and whether the loss was protected by insurance.
9. Insurance
You can subtract the premiums you pay for just about 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 deduct the cost of their health and employees? Compensation insurance.
10. Legal and Pro Services
Finally,. You can take charges that you pay to lawyers, accountants, property management firms, real estate investment consultants, and other execs. You can take these fees as operating costs so long as the costs are paid for work related to your rental activity.
Did You Know?
Did you know that:
- Landlords can hugely increase the depreciation reductions they receive the initial few years they own rental property by utilizing divided depreciation.
- Careful planning can enable you to deduct, in a single year, the cost of improvements to rental property that you may instead have to subtract over 27.5 years.
- You can hire out a vacation home tax-free, in a number of cases.
- Most little landlords can take up to $25,000 in rental property losses annually.
- A special tax rule allows some owners to take 100% of their rental property losses each year, regardless of how much.
- Folks who lease property to their family or friends can lose virtually all their tax reductions.
If you did not know any of these facts, you might be paying much more tax than you need to. As usual, be sure to talk with your tax advisor or tax pro.
[Author's note: View our new Better Business Bureau review.]
Rental real-estate provides more tax benefits than pretty much any other investment.
Every year, millions of owners pay more taxes on their rental earnings than they need to. Why? Because they fail to milk 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.
Often , these benefits make the biggest difference between losing money and earning a profit on a rental property. Here are the top ten tax repayments for owners of residential rental property:
1. Interest
Interest is often a landlord's single largest deductible cost. Common instances of interest that owners can subtract include mortgage interest charges on loans used to procure or improve rental property and interest on cards for products or services used in a rental activity.
2. Depreciation
The actual price of a place, loft building, or other rental property is not completely deductible in the year in which you pay for it. Instead , owners get back the cost of real estate through depreciation. This means deducting a little of the cost of the property over a few years.
3. Repairs
The price of repairs to income property (provided the repairs are standard, obligatory, and reasonable in amount) are totally deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.
4. Local Travel
Landlords have entitlement to a tax deduction whenever they drive anywhere for their rental activity. For instance, when you drive to your rental building to deal with a tenant complaint or go to the hardware store to purchase a part for a repair you can subtract your travel expenses.
If you drive a car, SUV, wagon, pickup, or panel truck for your rental activity (as most owners do), you have two options for subtracting your vehicle expenses. You can:
- take your exact expenses (gas, 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 strategy the first year you employ a car for your business activity. Furthermore, 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 reduction for the vehicle.
5. Long-haul Travel
If you travel overnite for your rental activity, you can deduct your airline fare, hotel bills, meals, and other expenses. If you plan your trip thoroughly, you may also mix owner business with pleasure and still take a deduction.
However , IRS auditors closely size up kickbacks for overnight travel? And many taxpayers get caught saying these reductions without correct records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to properly document your long haul travel costs.
6. Home Based Office
Provided they meet certain nominal wants, landlords may subtract their small office costs from their taxable revenue. This reduction 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 is true whether you own your house or house or are a renter.
7. Staff and Independent Contractors
If you hire any person to perform services for your rental activity, you can deduct their wages as a rental business cost. This is so whether the employee is a worker (for instance, a resident executive) or an independent contractor (for instance, a fix person).
8. Casualty and Theft Losses
If your rental property is damaged or wiped out from a unexpected event like a fire or flood, you may just be able to obtain a tax deduction for any part of your loss. These sorts of losses are called casualty losses. You usually won't be in a position to subtract the entire cost of property damaged or annihilated by a casualty. How much you may deduct depends on what proportion of your property was wrecked and whether the loss was protected by insurance.
9. Insurance
You can subtract the premiums you pay for just about 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 deduct the cost of their health and employees? Compensation insurance.
10. Legal and Pro Services
Finally,. You can take charges that you pay to lawyers, accountants, property management firms, real estate investment consultants, and other execs. You can take these fees as operating costs so long as the costs are paid for work related to your rental activity.
Did You Know?
Did you know that:
- Landlords can hugely increase the depreciation reductions they receive the initial few years they own rental property by utilizing divided depreciation.
- Careful planning can enable you to deduct, in a single year, the cost of improvements to rental property that you may instead have to subtract over 27.5 years.
- You can hire out a vacation home tax-free, in a number of cases.
- Most little landlords can take up to $25,000 in rental property losses annually.
- A special tax rule allows some owners to take 100% of their rental property losses each year, regardless of how much.
- Folks who lease property to their family or friends can lose virtually all their tax reductions.
If you did not know any of these facts, you might be paying much more tax than you need to. As usual, be sure to talk with your tax advisor 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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