Tuesday 24 December 2013

Top 10 Tax Rebates for Landlords

By Marco Santarelli


No landlord would pay more than necessary for utilities or other operating costs for a rental property. Yet millions of landlords pay more taxes on their rental earnings than they need to. Why?

Rental real estate provides more tax benefits than just about any other investment.

Every year, millions of landlords pay more taxes on their rental earnings than they have to. Why? Because they fail to take advantage of all the tax repayments available for owners of rental property. Cash-flow real estate provides more tax benefits than almost any other investment.

Often , these benefits make the biggest difference between losing money and earning a reasonable profit on a rental property. Here are the top 10 tax deductions for owners of residential rental property:

1. Interest

Interest is often a landlord's single largest deductible expense. Common instances of interest that landlords can deduct include mortgage loan payments on loans used to get or improve rental property and interest on credit cards for goods or services utilized in a rental activity.

2. Depreciation

The particular price of a house, loft building, or other rental property isn't absolutely deductible in the year in which you pay for it. As an alternative owners get back the cost of real-estate through depreciation. This involves subtracting a little of the cost of the property over one or two years.

3. Repairs

The price of repairs to income property (provided the repairs are standard, obligatory, and reasonable in amount) are fully deductible in the year in which they are incurred. Excellent examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.

4. Local Travel

Owners have entitlement to a tax reduction whenever they drive anywhere for their rental activity. As an example, when you drive to your rental building to cope with a tenant complaint or go to the appliance store to purchase a part for a repair you can take your travel costs.

If you drive an auto, SUV, wagon, pickup, or panel truck for your rental activity (as most landlords do), you have two options for taking your vehicle costs. You can:

- take your actual expenses (gasoline, upkeep, repairs), or
- use the standard mileage rate (56.5 cents per mile for 2013). To qualify for the standard mileage rate, you should use the standard mileage method the 1st year you use a car for your business activity. Furthermore, you can?t use the standard mileage rate if you have claimed accelerated depreciation deductions in previous years, or have taken a Section 179 deduction for the car.

5. Long-haul Travel

If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses. If you plan your trip fastidiously, you may also mix owner business with pleasure and still take a deduction.

But IRS auditors closely size up deductions for overnight travel? And many taxpayers get caught claiming these reductions without proper records to back them up. To remain within the law (and avoid unwished-for attention from the IRS), you want to properly document your long-distance travel expenses.

6. Home-based Office

Provided they meet certain minimum necessities, landlords may take their home office costs from their taxable income. This deduction applies not only to space dedicated to office work, and additionally to a workshop or any other home workspace you use for your rental business. This happens to be true whether you own your house or apartment or are a renter.

7. Staff and Independent Contractors

When you hire anyone to perform services for your rental activity, you can take their salary as a rental business expense. This is so whether the employee is a worker (as an example, a resident manager) or an independent contractor (as an example, a mend person).

8. Casualty and Burglary Losses

If your rental property is damaged or destroyed from a unexpected event like a fire or flood, you may just be able to acquire a tax reduction for all or part of your loss. These sorts of losses are called casualty losses. You sometimes won't be in a position to take the whole cost of property damaged or demolished by a casualty. How much you may subtract relies upon what quantity of your property was demolished and whether the loss was included in insurance.

9. Insurance

You can subtract the premiums you pay for nearly any insurance for your rental activity. This includes fire, burglary, and flood insurance for rental property, as well as landlord liability insurance. And if you have workers, you can deduct the price of their health and workers? Compensation insurance.

10. Legal and Pro Services

Ultimately,. You can deduct fees that you pay to lawyers, accountants, property management companies, property investment consultants, and other execs. You can deduct these fees as operating costs so long as the fees are paid for work related to your rental activity.

Did You Know?

Did you know that:

- Owners can hugely increase the depreciation rebates they receive the initial few years they own rental property by using divided depreciation.
- Considered planning can enable you to deduct, in a single year, the cost of enhancements to rental property that you may instead have to take over 27.5 years.
- You can rent out a holiday home tax-free, in a number of cases.
- Most small owners can subtract up to $25,000 in rental property losses each year.
- A special tax rule permits some owners to subtract 100% of their rental property losses every year, irrespective of how much.
- People who hire property to their family or pals can lose nearly all their tax reductions.

If you did not know any one of these facts, you might be paying much more tax than you want to. As always, be sure to consult with your tax confidant or tax professional.

[Author's note: View our new Better Business Bureau review.]




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