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Want to Pay
Less Taxes? Learn Your
Rental Property Tax Deductions Now PART 1
One of the
really beautiful things about being a landlord is the all rental
property tax deductions that you will get to enjoy. In fact, knowing
your tax benefits can mean between a profitable rental property and
failing real estate investment. Read this guide to make sure you know
every important tax break that you can enjoy.
During our
interviews with landlords, we were actually quite surprised to find out
how little some of them know about the tax laws in their areas. In some
cases, they could easily save thousands of dollars every year simply by
learning how to make the right rental property tax deductions.
To
make sure that you don't miss out any critical tax
savings, it's a good idea to have a rental property software that
will keep track of your tax deductions.
Among the 10+ property management software that we have reviewed so
far, Buildium stands
out because it keeps track of your rental property tax
deductions in real time and automatically generates tax reports. Click here for our
guides and reviews on the top rated rental property software.
1.
Interest Mortgage Payments and Credit Card Interest
This
is usually where you can save the most money on your taxes because
mortgage interest payments commonly take up a big chunk of your
expenses. If you took a loan to buy or improve your rental property,
the interest owed on these loans is tax deductible.
If you use
your credit card to buy goods and services for your rental property,
then you can also deduct your credit card interest from your taxes.
2.
Depreciation of Your Rental Property
This
is another important tax deductions that every landlord should know. In
many countries, you are able to claim tax breaks for the depreciation
of your property if you rent it out to others. Home owners usually do
not get to enjoy such benefits.
If you live
on your property but
rent out a portion of it to others, you can claim a partial deduction.
For example, you are living with your parents and two other tenants. In
this example you can claim a 40% depreciation as 40% of your property
is rented out.
Depending
on your property type and the real
estate laws in your country, the time period of depreciation
can vary anywhere from 15 to 40 years.
In the USA, residential rental property is usually depreciated over
27.5 years.
Let's
say you paid $300,000 for your rental property and the depreciation is
27.5 years. Then in your case, you will be able to claim rental
property tax deductions of $10,909 (300,000 / 27.5) every year.
3. Property
Repair and Maintenance Bills
Any
expenses that you spend for maintaining your rental property in
habitable condition are also tax deductible. The repairs have to
considered necessary and reasonable for it to count.
If you spent a bomb on home improvements to upgrade your rental
property, the renovation costs will not
be tax deductible.
Examples
of tax deductible repair expenses include wall repainting, repairing
plumbing and leaks, fixing damaged roofing and replacing broken windows.
4.
Costs of Hiring Real Estate Professionals
Whenever
you hire someone to help out with your real estate business, their
wages and costs can be considered as rental property tax deductions as
well.
This will generally include fees from your real estate
lawyers, licensed contractors, property agents, property managers and
accountants.
Now that you
uncovered 4 important
rental property tax deductions, we have another 4 more deductions lined
up for you:
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