No landlord would pay more than needed for utilities or other operating expenses for a rental property. Yet millions of owners pay more taxes on their rental income than they need 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 income than they need to. Why? Because they fail to exploit all the tax repayments available for owners of rental property. Investment real estate provides more tax benefits than pretty much any other investment.
Regularly these benefits make the greatest difference between losing money and earning a profit on a rental property. Here are the most popular 10 tax rebates for owners of home rental property:
1. Interest
Interest is often a landlord's single biggest deductible cost. Common instances of interest that owners can deduct include mortgage loan payments on loans used to acquire or improve rental property and interest on mastercards for goods or services employed in a rental activity.
2. Depreciation
The cost of a home, apartment building, or other rental property isn't 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 some of the cost of the property over one or two years.
3. Repairs
The price of repairs to income property (provided the repairs are normal, mandatory, and reasonable in amount) are completely 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
Owners are entitled to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to cope with a renter complaint or go to the hardware store to get a part for a repair you can deduct your travel costs.
If you drive an auto, SUV, wagon, pickup, or panel van for your rental activity (as most owners do), you have 2 options for taking your auto expenses. You can:
- subtract your tangible costs (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 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 speeded up depreciation kickbacks in prior years, or have taken a Section 179 reduction for the vehicle.
5. Long-haul Travel
If you travel overnight for your rental activity, you can subtract your airline fare, hotel bills, meals, and other costs. If you plan your trip carefully, you can also mix landlord business with pleasure and still take a reduction.
But IRS auditors closely scrutinize kickbacks for overnight travel? And many taxpayers get caught saying these deductions without correct records to back them up. To stay in the law (and avoid unwished-for attention from the IRS), you want to correctly document your long-distance travel costs.
6. Home Based Office
Provided they meet certain minimal requirements, owners may take their home-based office costs from their taxable income. This reduction applies not only to space dedicated 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 home or house or are a renter.
7. Employees and Independent Contractors
When you hire any person to perform services for your rental activity, you can subtract their salary as a rental business cost. This is so whether the employee is a worker (for instance, a resident executive) or an independent contractor (for example, a fix person).
8. Casualty and Burglary 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 deduction for any part of your loss. These kinds of losses are called casualty losses. You usually won't be well placed to take the whole price of property damaged or demolished by a casualty. How much you may take relies upon how much of your property was destroyed and whether the loss was included in 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 staff, you can deduct the cost of their health and workers? Compensation insurance.
10. Legal and Professional Services
Finally,. You can deduct charges that you pay to lawyers, accountants, property management companies, real estate investment counsels, and other pros. You can subtract these costs as operating costs as long as the costs 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 first few years they own rental property by employing segmented depreciation.
- Considered planning can allow you to take, in a single year, the cost of enhancements to rental property that you would otherwise have to deduct over 27.5 years.
- You can rent out a vacation home tax free, in a few cases.
- Most tiny landlords can take up to $25,000 in rental property losses every year.
- A special tax rule authorizes some owners to deduct 100% of their rental property losses each year, irrespective of how much.
- People who hire property to their family or pals can lose nearly all of their tax reductions.
If you didn't know any one of these facts, you could be paying far more tax than you want to. As always, be certain to check with your tax advisor or tax professional.
[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 income than they need to. Why? Because they fail to exploit all the tax repayments available for owners of rental property. Investment real estate provides more tax benefits than pretty much any other investment.
Regularly these benefits make the greatest difference between losing money and earning a profit on a rental property. Here are the most popular 10 tax rebates for owners of home rental property:
1. Interest
Interest is often a landlord's single biggest deductible cost. Common instances of interest that owners can deduct include mortgage loan payments on loans used to acquire or improve rental property and interest on mastercards for goods or services employed in a rental activity.
2. Depreciation
The cost of a home, apartment building, or other rental property isn't 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 some of the cost of the property over one or two years.
3. Repairs
The price of repairs to income property (provided the repairs are normal, mandatory, and reasonable in amount) are completely 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
Owners are entitled to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to cope with a renter complaint or go to the hardware store to get a part for a repair you can deduct your travel costs.
If you drive an auto, SUV, wagon, pickup, or panel van for your rental activity (as most owners do), you have 2 options for taking your auto expenses. You can:
- subtract your tangible costs (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 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 speeded up depreciation kickbacks in prior years, or have taken a Section 179 reduction for the vehicle.
5. Long-haul Travel
If you travel overnight for your rental activity, you can subtract your airline fare, hotel bills, meals, and other costs. If you plan your trip carefully, you can also mix landlord business with pleasure and still take a reduction.
But IRS auditors closely scrutinize kickbacks for overnight travel? And many taxpayers get caught saying these deductions without correct records to back them up. To stay in the law (and avoid unwished-for attention from the IRS), you want to correctly document your long-distance travel costs.
6. Home Based Office
Provided they meet certain minimal requirements, owners may take their home-based office costs from their taxable income. This reduction applies not only to space dedicated 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 home or house or are a renter.
7. Employees and Independent Contractors
When you hire any person to perform services for your rental activity, you can subtract their salary as a rental business cost. This is so whether the employee is a worker (for instance, a resident executive) or an independent contractor (for example, a fix person).
8. Casualty and Burglary 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 deduction for any part of your loss. These kinds of losses are called casualty losses. You usually won't be well placed to take the whole price of property damaged or demolished by a casualty. How much you may take relies upon how much of your property was destroyed and whether the loss was included in 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 staff, you can deduct the cost of their health and workers? Compensation insurance.
10. Legal and Professional Services
Finally,. You can deduct charges that you pay to lawyers, accountants, property management companies, real estate investment counsels, and other pros. You can subtract these costs as operating costs as long as the costs 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 first few years they own rental property by employing segmented depreciation.
- Considered planning can allow you to take, in a single year, the cost of enhancements to rental property that you would otherwise have to deduct over 27.5 years.
- You can rent out a vacation home tax free, in a few cases.
- Most tiny landlords can take up to $25,000 in rental property losses every year.
- A special tax rule authorizes some owners to deduct 100% of their rental property losses each year, irrespective of how much.
- People who hire property to their family or pals can lose nearly all of their tax reductions.
If you didn't know any one of these facts, you could be paying far more tax than you want to. As always, be certain to check with your tax advisor 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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