No owner would pay more than necessary for utilities or other operating costs for a rental property. Yet millions of landlords pay more taxes on their rental revenue than they must. Why?
Rental real estate provides more tax benefits than almost any other investment.
Each year, millions of owners pay more taxes on their rental income than they need to. Why? Because they fail to milk all the tax deductions available for owners of rental property. Income real estate provides more tax benefits than just about 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 repayments for owners of home rental property:
1. Interest
Interest is commonly a landlord's single largest deductible expense. Typical instances of interest that landlords can subtract include mortgage interest charges on loans used to get or improve rental property and interest on credit cards for products or services employed in a rental activity.
2. Depreciation
The actual value of a place, residence building, or other rental property is not fully deductible in the year in which you pay for it. As an alternative owners get back the price of property through depreciation. This involves subtracting some of the cost of the property over several years.
3. Repairs
The cost of repairs to income property (provided the repairs are normal, mandatory, and reasonable in amount) are completely deductible in the year in which they're sustained. Great 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 deduction when they drive anywhere for their rental activity. For instance, when you drive to your rental building to cope with a tenant complaint or go to the hardware store to get a part for a repair you can subtract your travel costs.
If you drive a vehicle, SUV, lorry, pickup, or panel truck for your rental activity (as most owners do), you have two options for subtracting your car costs. You can:
- subtract your actual expenses (gas, 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 1st year you employ a automobile for your business activity. Moreover, you can?t use the standard mileage rate if you have claimed sped up depreciation deductions 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 airfare, hotel bills, meals, and other costs. If you plan your journey thoroughly, you may also mix landlord business with pleasure and still take a reduction.
However , IRS auditors closely review kickbacks for overnight travel? And many taxpayers get caught claiming these deductions without proper records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you want to properly document your long haul travel costs.
6. Home-based Office
Provided they meet certain nominal requirements, landlords may deduct their home-based office costs from their taxable revenue. 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 really is true whether you own your home or apartment or are a renter.
7. Employees and Independent Contractors
If you hire anybody to perform services for your rental activity, you can deduct their salary as a rental business cost. This is so whether the worker is a worker (as an example, a resident chief) or an independent contractor (for example, a mend person).
8. Casualty and Burglary Losses
If your rental property is damaged or wiped out from a sudden event like a fire or flood, you might possibly be able to get a tax deduction for all or part of your loss. These types of losses are called casualty losses. You often won't be in a position to deduct the whole value of property damaged or demolished by a casualty. How much you will subtract is dependent on how much of your property was demolished and whether the loss was protected by insurance.
9. Insurance
You can deduct 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 responsibility insurance. And if you have workers, you can take the price of their health and workers? Compensation insurance.
10. Legal and Professional Services
Finally,. You can deduct costs that you pay to attorneys, accountants, property management companies, real-estate investment advisors, and other pros. You can subtract these fees as operating costs as long as the fees are paid for work related to your rental activity.
Did You Know?
Were you aware that:
- Landlords can greatly increase the depreciation deductions they receive the initial few years they own rental property by utilizing split depreciation.
- Considered planning can permit you to subtract, in a single year, the cost of improvements to rental property that you may instead have to deduct over 27.5 years.
- You can lease out a holiday home tax free, in a few cases.
- Most small landlords can subtract up to $25,000 in rental property losses annually.
- A special tax rule authorizes some owners to deduct 100% of their rental property losses each year, irrespective of how much.
- Folk who lease property to their family or friends can lose virtually all their tax deductions.
If you did not know any one of these facts, you might be paying much more tax than you need to. As always, be absolutely sure 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 owners pay more taxes on their rental income than they need to. Why? Because they fail to milk all the tax deductions available for owners of rental property. Income real estate provides more tax benefits than just about 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 repayments for owners of home rental property:
1. Interest
Interest is commonly a landlord's single largest deductible expense. Typical instances of interest that landlords can subtract include mortgage interest charges on loans used to get or improve rental property and interest on credit cards for products or services employed in a rental activity.
2. Depreciation
The actual value of a place, residence building, or other rental property is not fully deductible in the year in which you pay for it. As an alternative owners get back the price of property through depreciation. This involves subtracting some of the cost of the property over several years.
3. Repairs
The cost of repairs to income property (provided the repairs are normal, mandatory, and reasonable in amount) are completely deductible in the year in which they're sustained. Great 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 deduction when they drive anywhere for their rental activity. For instance, when you drive to your rental building to cope with a tenant complaint or go to the hardware store to get a part for a repair you can subtract your travel costs.
If you drive a vehicle, SUV, lorry, pickup, or panel truck for your rental activity (as most owners do), you have two options for subtracting your car costs. You can:
- subtract your actual expenses (gas, 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 1st year you employ a automobile for your business activity. Moreover, you can?t use the standard mileage rate if you have claimed sped up depreciation deductions 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 airfare, hotel bills, meals, and other costs. If you plan your journey thoroughly, you may also mix landlord business with pleasure and still take a reduction.
However , IRS auditors closely review kickbacks for overnight travel? And many taxpayers get caught claiming these deductions without proper records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you want to properly document your long haul travel costs.
6. Home-based Office
Provided they meet certain nominal requirements, landlords may deduct their home-based office costs from their taxable revenue. 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 really is true whether you own your home or apartment or are a renter.
7. Employees and Independent Contractors
If you hire anybody to perform services for your rental activity, you can deduct their salary as a rental business cost. This is so whether the worker is a worker (as an example, a resident chief) or an independent contractor (for example, a mend person).
8. Casualty and Burglary Losses
If your rental property is damaged or wiped out from a sudden event like a fire or flood, you might possibly be able to get a tax deduction for all or part of your loss. These types of losses are called casualty losses. You often won't be in a position to deduct the whole value of property damaged or demolished by a casualty. How much you will subtract is dependent on how much of your property was demolished and whether the loss was protected by insurance.
9. Insurance
You can deduct 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 responsibility insurance. And if you have workers, you can take the price of their health and workers? Compensation insurance.
10. Legal and Professional Services
Finally,. You can deduct costs that you pay to attorneys, accountants, property management companies, real-estate investment advisors, and other pros. You can subtract these fees as operating costs as long as the fees are paid for work related to your rental activity.
Did You Know?
Were you aware that:
- Landlords can greatly increase the depreciation deductions they receive the initial few years they own rental property by utilizing split depreciation.
- Considered planning can permit you to subtract, in a single year, the cost of improvements to rental property that you may instead have to deduct over 27.5 years.
- You can lease out a holiday home tax free, in a few cases.
- Most small landlords can subtract up to $25,000 in rental property losses annually.
- A special tax rule authorizes some owners to deduct 100% of their rental property losses each year, irrespective of how much.
- Folk who lease property to their family or friends can lose virtually all their tax deductions.
If you did not know any one of these facts, you might be paying much more tax than you need to. As always, be absolutely sure 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.