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Tax Deductions and Strategies for your
Rental Income
The holiday season is a great time to
organize tax deductions for your rental business. Many real estate
investors are particularly attracted to the rental industry because
of the rich tax advantages found in the tax code. Uncovering these
benefits is crucial to the profitability of any rental business.
These are some deductions and strategies to help you obtain
maximize your profits.
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Depreciation Deduction- The
actual cost of your rental property is deducted over 27 years, not
all at once. The appliances in your rental property are also
deductible but you must have accurate purchase receipts. Upon
purchase of real estate, there is a procedure available where by
you can list out all the short term depriciable assets and
depriciate these assets quicker than the land and improvements
terms available for the category of real estate purchased. Not
only is the costs deductible, the interest paid is also deductible.
Contact your tax attorneyor CPA for more info.
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Property Improvements
Deduction -Improvements to your property such as new landscaping,
room additions or adding porches are deductible.
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Repairs Deduction -General
repairs such as fixing broken pipes or windows, repairing drywall,
painting and changing carpet are completely deductible.
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Casualty Losses Deduction
-You can deduct the cost loss or damage of theft, fire, vandalism,
flood and other acts of God.
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Contributions to Charity
Deduction - Make sure you keep you receipts for all contributions
to charity. No matter how large the contribution, small
contributions add up to a considerable amount over the course of
the year.
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Interest Payment Deduction
-Mortgage, general loans and credit card interest payments are
deductible. This deduction is generally one of the largest in a
landlord’s portfolio.
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Anticipated Profit Strategy-
If you determine that your business will have a profit, try
prepaying some of the following years expenses. You will be able to
deduct the expenses on this years return. You might also purchase
anticipated additional equipment; your business can gain an
immediate 50% depreciation. Buying this equipment this year can
lower taxable income. Other expenses to accelerate include
prepayment of taxes, office supplies, insurance, and
utilities.
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Loss Deduction- If you have a
loss incurred this year, it can be deducted from your
taxes.
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Wage Deduction-All wages from
actual employees or independent contactors are deductible as a
business expense. This includes contractors, lawyers, accountants,
consultants or anybody else you hire to assist you in renting our
your property.
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Workspace Deduction-Whether
you rent an office or use a room in your home, you may be able to
deduct the cost from your taxes.
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Mortgage Prepay Deduction
Strategy-If you pay you Jan1 mortgage before Dec31, you may take
another deduction for the interest paid.
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Travel Expense Deduction-You
can deduct 40.5 cents a mile for everywhere you travel for your
rental business.
Identifying and
compiling your tax deductions may take some time but the
impact on the profitability of a business is vital its
long-term survival. This time of year is perfect for finding
the time to activate Tax Deductions and Strategies for
your Rental Income. Finally, contact your tax
professional and investment advisor before they hit their
busy season. You will get better and more personal
service. |
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