Being a landlord can have its advantages, tax wise. Owning rental properties entitles you to tax breaks and deductions. As a landlord, it is important for you to take advantage of these tax breaks and deductions in order to lower your personal tax liability.
Rental properties are considered to be tax-deductible by the Internal Revenue Service. So, all expenses related to your property are, potentially, tax deductions. If, however, you claim deductions that exceed the income from your rental properties, you are likely to find these deductions will be denied.
Interest payments are one of the biggest tax deductions for people owning rental properties. You can deduct the interest on your mortgage payments, loans for repairing or improving property, and even the interest on credit card purchases you made for anything regarding the properties you rent.
Rental property costs can be reclaimed through depreciation. Usually, you can apply depreciation from the second year you own your property for up to twenty-seven total years.
Anything you need to do to fix the properties is tax deductible. This includes labor, materials, and any interest on loans or credit card expenditures to repair or improve your rental properties.
Any travel expenses related to your rental properties are tax deductible. If you travel to inspect the properties, repair or maintain the properties, or collect the rent, it is all a tax-deductible expense. If you have to travel to consult with an attorney, accountant, or even a repairman about your rental property, it is a tax-deductible expense. If you have a dedicated vehicle used to haul and transport from one property to another, the gasoline, maintenance, and repair bills of this vehicle might qualify for a tax deduction
If you maintain a home office from which you conduct business related to your rental properties, the home office expenses are tax deductible.
Any physical losses to the property beyond your insurance claims for flood, fire, or natural disaster, are tax deductions, as well.
Any insurance premiums you pay related to your rental properties are tax deductible on your income tax return.
Service fees to property management companies, landscapers, attorneys, or accountants all comprise tax deductions. You can even obtain a home equity line of credit against your rental property and put that money in non-taxable investments.
Remember that when you own a rental property, you are in business. As with any business, property rental has its pros and cons when it comes to tax liability.
Rental Properties provide a very useful way have to manage your taxes and increase your income. But when you look out for some practical tips, you can’t find them. Here are some useful ones and discussed by Chintamani Abhyankar.