Let’s be real, taxes are awful. We hate paying them, figuring them out, and doing them. There is nothing about the tax process that is easy or even remotely enjoyable. That being said, there are many tax benefits that you can enjoy in being a property owner! These write-offs just may help take a little of the sting out of the process for you.
It’s widely known that mortgage interest on investment properties can be written off. But there are also many other types of interest can be written off. Interest paid on credit cards, lines of credit, loans used to acquire, improve, or perform activities related to the property can be written off as well!
What you need to know about depreciation: the IRS views real estate as a depreciating asset. The building's "useful" life is 27.5 years. This means you can write off a 1/27th of the building each year. In order to do that, you must separate out the value of the building from the value of the land.
Doing a segregation study will give you the option of depreciating some aspects of the property ahead of others. Personal property such as appliances, furniture, carpet, can usually be depreciated over 5 to 7 years. Improvements to the land like sidewalks, landscaping, fences, and paving can be depreciated over 15 years generally.
A cost segregation requires a lot more attention, are much more involved, but may be worth the extra effort, particularly if you are looking for more money back on the front end of owning a rental property.
Hop in the car to run across town and deal with a tenant complaint, run to the hardware store to grab a part to repair something in your rental, stop and get gas along the way, these are all travel deductions you should be claiming.
You have two options here:
-Deduct the actual expenses (gas, upkeep, repairs).
-Use the standard mileage rate (current rates can be found on the IRS web site).
Be careful to have all your ducks in a row here. The IRS closely scrutinizes travel expense deductions, especially when overnight travel is involved. Make sure to have records to back up your deductions you are claiming.
Employees and Contractors
Called the local plumber to deal with a major clog? Had an electrician change out some outlets? Paying a neighbor kid to mow the lawn every two weeks? These are all deductible expenses. Make sure to write out receipts and keep copies!
Legal & Professional Services
Attorney fees, accounting fees, property management fees are all operational expenses and a part of doing business! Good news is, you can write them all off!
Post an ad online, printed signs, mailed out brochures? Any kind of advertising for your property you pay for is deductible. Even fees that you may pay to various real estate organizations or groups can be written off.
Do Your Research
There are many things that can be written off that often go overlooked or maybe just aren’t known. When it comes to getting money back from the IRS make sure you have receipts, copies, documents, and everything organized to make it as thorough and easy on you as possible. It may also be helpful to hire an accountant or tax specialist to help guide you along the way so that you can be sure you aren’t leaving anything beneficial out.