Top Ten Tax Benefits for Landlords and Investment Real Estate
1. Interest This is often the biggest tax benefit that a landlord will take on their tax returns. You can deduct the mortgage interest from your investment property mortgage payments as well as the interest you pay on credit cards used to pay for material or labor on repairs performed on your rental properties.
2. Depreciation You cannot deduct the actual cost that you paid for the rental investment properties that you buy. Instead you realize the tax savings through depreciation. You deduct a portion of the price paid for the property over several years.
3. Repairs The repairs that you perform on your rental properties (as long as they are ordinary and necessary repairs) can be deducted in the year that they are performed.
4. Local Travel You are allowed to deduct the cost of your travel expenses whenever you drive anywhere for your rental property. Examples include traveling to and from your property for when doing inspections on work performed by your contractors, traveling to and from the hardware store to buy materials for repairs, and traveling to and from the bank to deposit rental checks.
You have two options when taking this deduction:
1. Take the deduction in the amount of your actual expenses (gas, upkeep and repairs).
2. Use the standard mileage rate of 56.5 cents per mile for 2013. To use the standard mileage rate you must have use the standard mileage rate from the first year that you used your vehicle for business. In addition you cannot have taken a Section 179 deduction for the vehicle in any previous year.
5. Long Distance Travel You can claim your long distance travel expenses as well with careful documentation. If you purchase properties out of state, then you can claim deduction for your airfare, meals and lodging expenses. Just make sure that you have careful documentation regarding the expenses as well as proof that you actually purchased a property or researched the purchase of a property.
6. Home Office Provided you meet certain requirements, landlords can deduct their home office expenses from their taxable income, whether you are a homeowner or renter. New for 2013 tax year, there is now a simplified method option for accounting for your home office. Unlike the regular method, you won't need to calculate your deduction based on actual expenses; just multiply the square footage of your home office by the rate, up to the maximum allowed, and take your deduction. The rate is $5 per square foot of the part of your home used for business. The maximum square footage allowed is 300 square feet. In either method, the space you are claiming as a home office must be used exclusively as a home office.
7. Employees and Independent Contractors You can deduct any wages or labor paid as a result of your rental activity. This is regardless of whether the wages paid are for an employee or an independent contractor.
8. Casualty and Theft Losses If your rental property is damaged or destroyed from a sudden event like a fire or flood, you may be able to obtain a tax deduction for all or part of your loss. These types of losses are called casualty losses. You usually won't be able to deduct the entire cost of property damaged or destroyed by a casualty. How much you may deduct depends on how much of your ฝากขายคอนโด property was destroyed and whether the loss was covered by insurance.
9. Insurance You can deduct the insurance premiums you pay for most insurance services on your rental properties. Insurance coverages like flood, fire and theft as well as premiums paid for liability insurance are all deductible. Even insurance premiums for health and dental coverages, as well as worker's compensation, that you pay for employees are tax deductible.
10. Legal and Professional Services You can deduct the fees paid for professional services like attorney's fees, accounting fees and property management fees as long as these fees are related to your rental properties. You can even deduct fees paid to real estate mentors.
I hope this article helps you maximize your tax deductions for the coming year. As always, make sure you consult your tax advisor or a tax professional and discuss your particular situation and how these tax deductions will best benefit you.
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