Top Ten Tax Deductions for Landlords

No owner would pay more than necessary for resources or other operating costs for a rental property. Yet millions of owners pay more taxes on their rental income than they must. Why?

Rental real estate provides more tax benefits than just about any other investment.

Every year, millions of owners pay more taxes on their rental revenue than they need to. Why? Because they fail to milk all the tax deductions available for owners of rental property. Cash-flow real estate provides more tax benefits than pretty much 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 expense. Typical instances of interest that owners can take include mortgage interest payments on loans used to get or improve rental property and interest on cards for goods or services employed in a rental activity.

2. Depreciation

The actual value of a place, residence building, or other rental property isn’t absolutely deductible in the year in which you pay for it. Instead , owners get back the price of real estate through depreciation. This involves taking a little of the price of the property over several years.

3. Repairs

The price of repairs to rental property (provided the repairs are ordinary, necessary, and reasonable in amount) are totally deductible in the year in which they are sustained. Great 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 purchase a part for a repair [*COMMA] you can take your travel costs.

If you drive an auto, SUV, lorry, pickup, or panel truck for your rental activity (as most owners do), you have two options for deducting your auto costs. You can:

  • take your exact costs (gas, 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 technique the 1st year you utilise a automobile for your business activity. Also, you can?t use the standard mileage rate if you have claimed sped up depreciation deductions in previous years, or have taken a Section 179 reduction for the car.

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 carefully, you can even mix owner business with pleasure and still take a reduction.

However , IRS auditors closely scrutinize rebates for overnite travel? And many taxpayers get caught claiming these deductions without correct records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to correctly document your long haul travel costs.

6. Home Based Office

Provided they meet certain minimal requirements, owners may take their home-based office costs from their taxable revenue. This reduction applies not only to space dedicated to office work, but also 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 house or are a renter.

7. Workers and Independent Contractors

Whenever you hire anyone to perform services for your rental activity, you can take their salary as a rental business cost. This is so whether the worker is an employee (as an example, a resident manager) or an independent contractor (as an 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 may just be able to obtain a tax reduction for all or part of your loss. These types of losses are called casualty losses. You often won?t be in a position to take the entire value of property damaged or destroyed by a casualty. How much you can take depends on what quantity of your property was wrecked and whether the loss was included in insurance.

9. Insurance

You can take the premiums you pay for nearly any insurance for your rental activity. This includes fire, burglary, and flood insurance for rental property, as well as owner culpability insurance. And if you have employees, you can take the price of their health and employees? Compensation insurance.

10. Legal and Pro Services

Eventually,. You can take fees that you pay to attorneys, accountants, property management companies, real-estate investment consultants, and other execs. You can take these costs as operating costs as long as the fees are paid for work related to your rental activity.

Did You Know?

Do you know that:

  • Owners can hugely increase the depreciation rebates they receive the first few years they own rental property by using segmented depreciation.
  • Well thought out planning can permit you to deduct, in a single year, the price of enhancements to rental property that you may instead have to take over 27.5 years.
  • You can hire out a holiday home tax-free, in a few cases.
  • Most little owners can take up to $25,000 in rental property losses annually.
  • A special tax rule permits some owners to deduct 100% of their rental property losses every year, regardless of how much.
  • People who hire property to their family or friends can lose just about all their tax rebates.

If you didn’t know any one of these facts, you might be paying far more tax than you need to.

As always, be absolutely sure to consult with your tax adviser or tax professional.

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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.