Rental Real Estate provides more tax benefits than almost
any other investment.
- Interest is often a landlord’s single biggest deductible expense. Interest that can be deducted include Mortgage interest payments on loans you acquired to purchase the property and to make improvements to the property along with the credit card interest used for goods or services related to the property.
- Depreciation means landlords get back the cost of real estate through deducting a portion of the cost of the property over several years. For example if you paid 100,000 for the property and it’s depreciated over 27.5 years which would be 3,636, you can have that amount in passive income without having to owe income taxes.
- Repairs made to the property are fully deductible as long as it occurs in the same year for which you are filing your taxes. Example: all your 2013 repairs have to be filed with your 2013 income taxes.
- Local travel deductions can be
taken whenever the landlord travels for rental activity. For example
meeting with a tenant or going to the local Home Depot to get supplies for
repairs. There are two ways to take this deduction: deduct your actual
expenses such as gas, car repairs and upkeep or by using the Federal
standard mileage rate which for 2013 is 55.5 cents per mile.
- Long
Distance Travel related to your rental property such as airfare, lodging,
meals and other expenses can also be taken as a deduction. For example if
your rental property is located in a state you don’t live in and you have
to travel to the property.
6. Home
Office space that meets minimal criteria for Landlords may be deducted
from your taxable income along with workshops attended for your rental
business. This applies to you whether you own or rent the home or
apartment where your home office is located.
7. Independent
Contractors and Employees you hire to perform services for your rental
property, their wages can be deducted as a business expense. For example a
Repair person or a Property Manager.
8. Casualty
and Theft Losses if your rental property is damaged or destroyed from a
event such as a fire or flood may be deducted for all or part of the
damages depending on your Insurance claim these are called Casualty
losses.
9. Insurance
premiums for most types of insurance on your rental property can be
deducted. For example, flood, theft, and fire policies. And even employees
health and workers compensation insurance.
10. Legal
and Professional Services that you pay an Attorney, Property Management
Company, Accountants, Advisors and other professionals. These fees are
operating expense deductions.