No owner would pay more than needed for resources or other operating costs for a rental property. Yet millions of landlords pay more taxes on their rental earnings than they must. Why?
Rental real estate provides more tax benefits than pretty much any other investment.
Each year, millions of owners pay more taxes on their rental income than they should. Why? Because they fail to exploit all of the tax repayments available for owners of rental property. Cash-flow real estate provides more tax benefits than almost any other investment.
Often , these benefits make the greatest 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 expense. Typical instances of interest that owners can take include mortgage interest payments on loans used to procure or improve rental property and interest on mastercards for products or services employed in a rental activity.
2. Depreciation
The cost of a place, apartment building, or other rental property isn't absolutely deductible in the year in which you pay for it. As an alternative landlords get back the cost of property through depreciation. This means taking 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 normal, obligatory, and reasonable in amount) are fully 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 broken windows.
4. Local Travel
Owners have entitlement to a tax reduction when 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 hardware store to get a part for a repair you can deduct your travel costs.
If you drive a vehicle, SUV, van, pickup, or panel truck for your rental activity (as most landlords do), you have 2 options for taking your car expenses. You can:
- subtract your tangible expenses (gasoline, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To qualify for the standard mileage rate, you must use the standard mileage method the first year you employ a automobile for your business activity. Moreover, 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 reduction for the vehicle.
5. Long Distance 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 fastidiously, you can also mix landlord business with pleasure and still take a reduction.
Nonetheless IRS auditors closely review 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 wants, landlords may subtract their home office expenses from their taxable revenue. This reduction applies not only to space dedicated to office work, but additionally to a workshop or any other home workspace you use for your rental business. This is true whether you own your home or studio 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 expense. This is so whether the worker is an employee (for example, a resident chief) or an independent contractor (for example, a mend person).
8. Casualty and Theft Losses
If your rental property is damaged or destroyed from a unexpected event like a fire or flood, you might possibly be able to acquire a tax deduction for all or part of your loss. These kinds of losses are called casualty losses. You often won't be well placed to deduct the whole price of property damaged or destroyed by a casualty. How much you may subtract is dependent on how much of your property was destroyed and whether the loss was protected by 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 liability insurance. And if you have staff, you can subtract the cost of their health and workers? Compensation insurance.
10. Legal and Pro Services
Finally,. You can subtract fees that you pay to lawyers, accountants, real estate management firms, property investment consultants, and other pros. You can take these charges as operating costs as long as the costs are paid for work related to your rental activity.
Did You Know?
Were you aware that:
- Landlords can hugely increase the depreciation deductions they receive the initial few years they own rental property by employing divided depreciation.
- Considered planning can enable you to take, in a single year, the price of enhancements to rental property that you would otherwise have to take over 27.5 years.
- You can rent out a holiday home tax-free, in some cases.
- Most tiny landlords can deduct up to $25,000 in rental property losses each year.
- A special tax rule authorizes some owners to subtract 100% of their rental property losses each year, no matter how much.
- Folks who hire property to their family or pals can lose just about all of their tax rebates.
If you didn't know any of these facts, you could be paying much more tax than you need to. As always, be sure to consult with your tax adviser 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.
Each year, millions of owners pay more taxes on their rental income than they should. Why? Because they fail to exploit all of the tax repayments available for owners of rental property. Cash-flow real estate provides more tax benefits than almost any other investment.
Often , these benefits make the greatest 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 expense. Typical instances of interest that owners can take include mortgage interest payments on loans used to procure or improve rental property and interest on mastercards for products or services employed in a rental activity.
2. Depreciation
The cost of a place, apartment building, or other rental property isn't absolutely deductible in the year in which you pay for it. As an alternative landlords get back the cost of property through depreciation. This means taking 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 normal, obligatory, and reasonable in amount) are fully 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 broken windows.
4. Local Travel
Owners have entitlement to a tax reduction when 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 hardware store to get a part for a repair you can deduct your travel costs.
If you drive a vehicle, SUV, van, pickup, or panel truck for your rental activity (as most landlords do), you have 2 options for taking your car expenses. You can:
- subtract your tangible expenses (gasoline, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To qualify for the standard mileage rate, you must use the standard mileage method the first year you employ a automobile for your business activity. Moreover, 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 reduction for the vehicle.
5. Long Distance 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 fastidiously, you can also mix landlord business with pleasure and still take a reduction.
Nonetheless IRS auditors closely review 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 wants, landlords may subtract their home office expenses from their taxable revenue. This reduction applies not only to space dedicated to office work, but additionally to a workshop or any other home workspace you use for your rental business. This is true whether you own your home or studio 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 expense. This is so whether the worker is an employee (for example, a resident chief) or an independent contractor (for example, a mend person).
8. Casualty and Theft Losses
If your rental property is damaged or destroyed from a unexpected event like a fire or flood, you might possibly be able to acquire a tax deduction for all or part of your loss. These kinds of losses are called casualty losses. You often won't be well placed to deduct the whole price of property damaged or destroyed by a casualty. How much you may subtract is dependent on how much of your property was destroyed and whether the loss was protected by 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 liability insurance. And if you have staff, you can subtract the cost of their health and workers? Compensation insurance.
10. Legal and Pro Services
Finally,. You can subtract fees that you pay to lawyers, accountants, real estate management firms, property investment consultants, and other pros. You can take these charges as operating costs as long as the costs are paid for work related to your rental activity.
Did You Know?
Were you aware that:
- Landlords can hugely increase the depreciation deductions they receive the initial few years they own rental property by employing divided depreciation.
- Considered planning can enable you to take, in a single year, the price of enhancements to rental property that you would otherwise have to take over 27.5 years.
- You can rent out a holiday home tax-free, in some cases.
- Most tiny landlords can deduct up to $25,000 in rental property losses each year.
- A special tax rule authorizes some owners to subtract 100% of their rental property losses each year, no matter how much.
- Folks who hire property to their family or pals can lose just about all of their tax rebates.
If you didn't know any of these facts, you could be paying much more tax than you need to. As always, be sure to consult with your tax adviser 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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