No landlord would pay more than necessary for utilities or other operating costs for a rental property. Yet millions of owners pay more taxes on their rental income than they have to. Why?
Rental real-estate provides more tax benefits than almost any other investment.
Each year, millions of landlords pay more taxes on their rental earnings than they should. Why? Because they fail to take advantage of all the tax repayments available for owners of rental property. Cash-flow real estate provides more tax benefits than just about any other investment.
Frequently these benefits make the biggest difference between losing money and earning a reasonable profit on a rental property. Here are the top ten tax rebates for owners of residential rental property:
1. Interest
Interest is sometimes a landlord's single largest deductible cost. Common instances of interest that landlords can deduct include mortgage interest payments on loans used to get or improve rental property and interest on cards for services or products employed in a rental activity.
2. Depreciation
The actual cost of a home, loft building, or other rental property isn't completely deductible in the year in which you pay for it. As an alternative landlords get back the price of real estate through depreciation. This implies deducting some of the cost of the property over one or two years.
3. Repairs
The cost of repairs to investment property (provided the repairs are standard, obligatory, and reasonable in amount) are completely deductible in the year in which they're incurred. Excellent examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing damaged windows.
4. Local Travel
Owners have entitlement to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to handle a renter complaint or go to the appliance store to get a part for a repair you can deduct your travel costs.
If you drive a car, SUV, wagon, pickup, or panel lorry for your rental activity (as most landlords do), you have 2 options for subtracting your vehicle expenses. You can:
- take your exact costs (petrol, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To qualify for the standard mileage rate, you need to use the standard mileage technique the first year you use a automobile for your business activity. Furthermore, you can?t use the standard mileage rate if you have claimed speeded up depreciation deductions in prior years, or have taken a Section 179 deduction for the auto.
5. Long Haul Travel
If you travel overnite for your rental activity, you can take your airline fare, hotel bills, meals, and other expenses. If you arrange your trip thoroughly, you may also mix landlord business with pleasure and still take a deduction.
Nonetheless IRS auditors closely size up kickbacks for overnite travel? And many taxpayers get caught saying these deductions without correct records to back them up. To remain in the law (and avoid unwished-for attention from the IRS), you need to correctly document your long haul travel expenses.
6. Home Based Office
Provided they meet certain nominal requirements, owners may subtract their home office costs from their taxable earnings. This deduction applies not only to space devoted to office work, but also to a workshop or any other home workspace you use for your rental business. This is true whether you own your house or apartment or are a renter.
7. Staff and Independent Contractors
Whenever you hire anybody to perform services for your rental activity, you can take their salary as a rental business expense. This is so whether the employee is a worker (as an example, a resident chief) or an independent contractor (as an example, a mend person).
8. Casualty and Burglary Losses
If your rental property is damaged or destroyed from a unexpected event like a fire or flood, you may just be able to obtain a tax reduction for any part of your loss. These types of losses are called casualty losses. You usually won't be in a position to take the whole value of property damaged or destroyed by a casualty. How much you can subtract relies upon how much of your property was demolished and whether the loss was covered by insurance.
9. Insurance
You can take the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as owner responsibility insurance. And if you have workers, you can take the cost of their health and employees? Compensation insurance.
10. Legal and Pro Services
Eventually,. You can subtract fees that you pay to lawyers, accountants, property management firms, real-estate investment counsels, and other execs. You can deduct these costs as operating costs as long as the costs are paid for work related to your rental activity.
Did You Know?
Do you know that:
- Landlords can greatly increase the depreciation deductions they receive the initial few years they own rental property by utilizing segmented depreciation.
- Considered planning can allow you to take, in a single year, the price of improvements to rental property that you would instead have to subtract over 27.5 years.
- You can hire out a vacation home tax-free, in a few cases.
- Most small landlords can take up to $25,000 in rental property losses annually.
- A special tax rule permits some owners to take 100% of their rental property losses each year, regardless of how much.
- Folk who hire property to their family or friends can lose nearly all of their tax deductions.
If you didn't know any one of these facts, you could be paying far more tax than you need to. As usual, be absolutely sure to check 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 almost any other investment.
Each year, millions of landlords pay more taxes on their rental earnings than they should. Why? Because they fail to take advantage of all the tax repayments available for owners of rental property. Cash-flow real estate provides more tax benefits than just about any other investment.
Frequently these benefits make the biggest difference between losing money and earning a reasonable profit on a rental property. Here are the top ten tax rebates for owners of residential rental property:
1. Interest
Interest is sometimes a landlord's single largest deductible cost. Common instances of interest that landlords can deduct include mortgage interest payments on loans used to get or improve rental property and interest on cards for services or products employed in a rental activity.
2. Depreciation
The actual cost of a home, loft building, or other rental property isn't completely deductible in the year in which you pay for it. As an alternative landlords get back the price of real estate through depreciation. This implies deducting some of the cost of the property over one or two years.
3. Repairs
The cost of repairs to investment property (provided the repairs are standard, obligatory, and reasonable in amount) are completely deductible in the year in which they're incurred. Excellent examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing damaged windows.
4. Local Travel
Owners have entitlement to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to handle a renter complaint or go to the appliance store to get a part for a repair you can deduct your travel costs.
If you drive a car, SUV, wagon, pickup, or panel lorry for your rental activity (as most landlords do), you have 2 options for subtracting your vehicle expenses. You can:
- take your exact costs (petrol, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To qualify for the standard mileage rate, you need to use the standard mileage technique the first year you use a automobile for your business activity. Furthermore, you can?t use the standard mileage rate if you have claimed speeded up depreciation deductions in prior years, or have taken a Section 179 deduction for the auto.
5. Long Haul Travel
If you travel overnite for your rental activity, you can take your airline fare, hotel bills, meals, and other expenses. If you arrange your trip thoroughly, you may also mix landlord business with pleasure and still take a deduction.
Nonetheless IRS auditors closely size up kickbacks for overnite travel? And many taxpayers get caught saying these deductions without correct records to back them up. To remain in the law (and avoid unwished-for attention from the IRS), you need to correctly document your long haul travel expenses.
6. Home Based Office
Provided they meet certain nominal requirements, owners may subtract their home office costs from their taxable earnings. This deduction applies not only to space devoted to office work, but also to a workshop or any other home workspace you use for your rental business. This is true whether you own your house or apartment or are a renter.
7. Staff and Independent Contractors
Whenever you hire anybody to perform services for your rental activity, you can take their salary as a rental business expense. This is so whether the employee is a worker (as an example, a resident chief) or an independent contractor (as an example, a mend person).
8. Casualty and Burglary Losses
If your rental property is damaged or destroyed from a unexpected event like a fire or flood, you may just be able to obtain a tax reduction for any part of your loss. These types of losses are called casualty losses. You usually won't be in a position to take the whole value of property damaged or destroyed by a casualty. How much you can subtract relies upon how much of your property was demolished and whether the loss was covered by insurance.
9. Insurance
You can take the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as owner responsibility insurance. And if you have workers, you can take the cost of their health and employees? Compensation insurance.
10. Legal and Pro Services
Eventually,. You can subtract fees that you pay to lawyers, accountants, property management firms, real-estate investment counsels, and other execs. You can deduct these costs as operating costs as long as the costs are paid for work related to your rental activity.
Did You Know?
Do you know that:
- Landlords can greatly increase the depreciation deductions they receive the initial few years they own rental property by utilizing segmented depreciation.
- Considered planning can allow you to take, in a single year, the price of improvements to rental property that you would instead have to subtract over 27.5 years.
- You can hire out a vacation home tax-free, in a few cases.
- Most small landlords can take up to $25,000 in rental property losses annually.
- A special tax rule permits some owners to take 100% of their rental property losses each year, regardless of how much.
- Folk who hire property to their family or friends can lose nearly all of their tax deductions.
If you didn't know any one of these facts, you could be paying far more tax than you need to. As usual, be absolutely sure to check 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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