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Rental Income Tax Deductions and Strategies

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Rental Income Tax Deductions and Strategies
by Manuel Lopez

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.

• 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 to properly. Not only are the costs deductible, the interest paid is also deductible.

• Property Improvements Deduction -Improvements to your property such as new landscaping, room additions or adding porches are deductible.

• Repairs Deduction -General repairs such as fixing broken pipes or windows, repairing drywall, painting and changing carpet are completely deductible.

• Casualty Losses Deduction -You can deduct the cost loss or damage of theft, fire, vandalism, flood and other acts of God.

• 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.

• 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.

• 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 year's 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.

• Loss Deduction - If you have a loss incurred this year, it can be deducted from your taxes.

• 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 out your property.

• 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. Also include advertising for the property, cell phone use/ Internet access/office line, computer equipment office supplies (Computer paper, pens and printer cartridges, postage, desk equipment.)

• Mortgage Prepay Deduction Strategy - If you pay you Jan1 mortgage before Dec31, you may take another deduction for the interest paid.

• 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. Don't wait until tax season to keep track of Tax Deductions and Strategies for your Rental Income. In particular, contact your tax professional and investment advisor before they hit their busy season. Working with a qualified tax person can help you discover any deductions you might have overlooked.

As always, information in this article is not intended to be used, and should not be used, as legal, tax or accounting advice. Investors should seek advice from an independent financial advisor about their specific situation.

Additional Resources - Landlord2Landlord offers a list of helpful resources at http://www.landlord2landlord.com/HelpfulLinks.aspx.that may be of further use to you, including links to the American Association of Small Property Owners, a variety of home improvement contractors and service providers, and a resource for Real Estate Forms for all 50 States

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