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Pay
Less for Your Rental
Property Tax
Right Now with These Easy Steps
If you are
a landlord, learning how to effectively lower your rental property tax
can mean the difference between owning a profit-making rental property
and a money-sucking liability. Learn all about your landlord taxes and
the different steps you can take to reduce them right now.
Step
1: Keep Proper Written Records of All Your Rental Income and Expenses
As
a landlord, your rental property is a vital source of income. Keeping a
complete record of all rental income and expenses of your property will
ensure that you don't miss out any possible tax deductions.
Do you know
what exactly makes up your rental income and expense? If No,
Click
here
to read our complete Rental Property Accounting Guide first.
Relevant
records of your rental income includes any receipts for rent and other
payment received from your tenant. If your tenant pays you rent by
mailing you checks, photocopy the checks as proof of receipt.
When
it comes to your rental expenses, you will have more paperwork to
handle. Important documents for rental expenses include property repair
bills, rental property insurance report and mortgage interest records.
If you travel or hire employees to manage your property, keep
all
your receipts and payment records as well.
Step
2: Take Time to Go Through Your Local Rental Property Tax Rules
Although it
may can be a bit of a hassle, it can help you greatly if
you take some time to read your local property tax rules.
Pay special attention to the section on your rental property
tax deductions.
(also known as rental expenses). Make sure you include every single tax
deduction you are granted by the law so that you can minimise the
amount of taxes you need to pay.
For example
do you know that if
you pay for rental property expenses with your credit card, it's
possible for you to deduct the credit card
interest from your
total taxable income? Interest payment is generally considered as a
type of tax deduction and that includes credit card interest as well.
If
you own foreign rental properties and travel overseas to manage them,
the travelling costs raked up might even be considered as tax
deductible expenses.
The taxes in some countries are more friendly to landlords which is why
it pays to find out.
Every area
has slightly different tax rules so you will need to know which tax
exemptions and breaks you can get to enjoy.
Step
3: Make Sure You are Recognised as a Business Owner and Not Investor
When
you are a landlord, you can be either considered as a business owner or
investor. This may seem like a small detail but it will greatly affect
how you will be taxed and what type of tax benefits you will be granted.
A
business owner is defined as someone who works regularly and
continuously to make a profit from his rental property. On the other
hand, an investor is one who considers his rental properties as assets
and does little or nothing to milk profits from it. To be seen as a
business owner, you have to take a more pro-active role in managing
your property.
So why bother being a business owner? Compared to
investors, business owners generally get to enjoy additional rental tax
deductions so they will end up paying less taxes:
Home office
deductions - If you use your home as your office to manage your rental
properties, you are allowed to deduct the costs of setting it up.
To
encourage more people to set up businesses, most countries will give
business owners a tax break when it comes to their start-up costs. In
the United States you are allowed to deduct up to $5,000 for money that
you spent to get your rental business up and running.
Depending
on your area's tax laws, a business owner is able to
write off a larger part of the loss compared to an investor. For
example if you lost $10,000 selling your rental property, the amount of
loss you can claim as an investor may be capped at $3,000 while a
business owner can record the full $10,000 as a loss.
Read
what our visitors have to share below OR Scroll down to
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What are Your Most Powerful Methods
for Slashing Your Rental Property Tax?
Cutting down on your property taxes is crucial for boosting your rental profits. Do you know any effective methods to lower landlord taxes and put more money back into our pockets? Share your valuable experience with everyone here - We will love to hear your tips, comments and real life stories:
What Our Visitors Have to Share on Slashing Rental Property Taxes
Click on the links below to read the valuable tips that our other visitors have to share:
1031 Exchanges for Rental Property Tax Benefits
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Claiming Rental Property Tax Losses
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If you are claiming losses for your rental property tax, there is a subtle but critical tax law that you must know. When you rent out properties in the ...
Want to learn MORE practical must-know facts on
slashing your property taxes?
Return from
this page to our Rental
Property Tax Deductions guide
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