No owner 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 revenue than they need to. 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 revenue than they need to. Why? Because they fail to take advantage of all of the tax rebates 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 decent profit on a rental property. Here are the most popular 10 tax repayments for owners of residential rental property:
1. Interest
Interest is often a landlord's single largest deductible cost. Common examples of interest that landlords can subtract include mortgage loan payments on loans used to get or improve rental property and interest on cards for goods or services used in a rental activity.
2. Depreciation
The price of a place, residence building, or other rental property is not absolutely deductible in the year in which you pay for it. As an alternative landlords get back the price of real-estate through depreciation. This involves deducting some of the price 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 are incurred. Excellent 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 reduction 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 appliance 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 landlords do), you have 2 options for deducting your car costs. You can:
- deduct your exact expenses (petrol, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To be accepted for the standard mileage rate, you must use the standard mileage method the first year you employ a car for your business activity. Moreover, you can?t use the standard mileage rate if you have claimed sped up depreciation kickbacks in prior years, or have taken a Section 179 deduction for the vehicle.
5. Long Haul Travel
If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other costs. If you plan your trip fastidiously, you can even mix landlord business with pleasure and still take a reduction.
But IRS auditors closely size up rebates for overnight travel? And many taxpayers get caught saying these reductions without correct records to back them up. To stay in the law (and avoid unwanted attention from the IRS), you want to correctly document your long distance travel costs.
6. Home Based Office
Provided they meet certain minimum requirements, landlords may subtract their home office costs from their taxable earnings. This deduction 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 happens to be true whether you own your house or studio or are a renter.
7. Staff and Independent Contractors
Whenever you hire any person to perform services for your rental activity, you can deduct their salary as a rental business expense. This is so whether the worker is an employee (as an example, a resident executive) or an independent contractor (as an example, a fix 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 get a tax reduction for any part of your loss. These sorts of losses are called casualty losses. You often won't be able to take the entire cost of property damaged or annihilated by a casualty. How much you may subtract relies upon what proportion of your property was demolished 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, theft, and flood insurance for rental property, as well as landlord culpability insurance. And if you have staff, you can subtract the cost of their health and employees? Compensation insurance.
10. Legal and Professional Services
Ultimately,. You can take fees that you pay to attorneys, accountants, property management firms, real estate investment advisors, and other pros. You can take these costs as operating expenses so long as the fees 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 utilizing split depreciation.
- Considered planning can permit you to deduct, in a single year, the price of improvements to rental property that you would otherwise have to deduct over 27.5 years.
- You can hire out a holiday home tax free, in a number of cases.
- Most little landlords can deduct up to $25,000 in rental property losses each year.
- A special tax rule allows some landlords to take 100% of their rental property losses every year, irrespective of how much.
- People who rent property to their family or pals can lose nearly all their tax rebates.
If you did not know any one of these facts, you could be paying far more tax than you need to. As always, be absolutely sure to talk with your tax confidant or tax professional.
[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 revenue than they need to. Why? Because they fail to take advantage of all of the tax rebates 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 decent profit on a rental property. Here are the most popular 10 tax repayments for owners of residential rental property:
1. Interest
Interest is often a landlord's single largest deductible cost. Common examples of interest that landlords can subtract include mortgage loan payments on loans used to get or improve rental property and interest on cards for goods or services used in a rental activity.
2. Depreciation
The price of a place, residence building, or other rental property is not absolutely deductible in the year in which you pay for it. As an alternative landlords get back the price of real-estate through depreciation. This involves deducting some of the price 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 are incurred. Excellent 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 reduction 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 appliance 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 landlords do), you have 2 options for deducting your car costs. You can:
- deduct your exact expenses (petrol, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To be accepted for the standard mileage rate, you must use the standard mileage method the first year you employ a car for your business activity. Moreover, you can?t use the standard mileage rate if you have claimed sped up depreciation kickbacks in prior years, or have taken a Section 179 deduction for the vehicle.
5. Long Haul Travel
If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other costs. If you plan your trip fastidiously, you can even mix landlord business with pleasure and still take a reduction.
But IRS auditors closely size up rebates for overnight travel? And many taxpayers get caught saying these reductions without correct records to back them up. To stay in the law (and avoid unwanted attention from the IRS), you want to correctly document your long distance travel costs.
6. Home Based Office
Provided they meet certain minimum requirements, landlords may subtract their home office costs from their taxable earnings. This deduction 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 happens to be true whether you own your house or studio or are a renter.
7. Staff and Independent Contractors
Whenever you hire any person to perform services for your rental activity, you can deduct their salary as a rental business expense. This is so whether the worker is an employee (as an example, a resident executive) or an independent contractor (as an example, a fix 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 get a tax reduction for any part of your loss. These sorts of losses are called casualty losses. You often won't be able to take the entire cost of property damaged or annihilated by a casualty. How much you may subtract relies upon what proportion of your property was demolished 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, theft, and flood insurance for rental property, as well as landlord culpability insurance. And if you have staff, you can subtract the cost of their health and employees? Compensation insurance.
10. Legal and Professional Services
Ultimately,. You can take fees that you pay to attorneys, accountants, property management firms, real estate investment advisors, and other pros. You can take these costs as operating expenses so long as the fees 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 utilizing split depreciation.
- Considered planning can permit you to deduct, in a single year, the price of improvements to rental property that you would otherwise have to deduct over 27.5 years.
- You can hire out a holiday home tax free, in a number of cases.
- Most little landlords can deduct up to $25,000 in rental property losses each year.
- A special tax rule allows some landlords to take 100% of their rental property losses every year, irrespective of how much.
- People who rent property to their family or pals can lose nearly all their tax rebates.
If you did not know any one of these facts, you could be paying far more tax than you need to. As always, be absolutely sure to talk with your tax confidant 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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