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Tax Advantages of Rental Property

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RENTAL PROPERTY TAX DEDUCTIONS FOR LANDLORDS

ALWAYS CONSULT A QUALIFIED TAX PLANNING SPECIALIST FOR A PROFESSIONAL OPINION

 TAX ADVANTAGE FOR LANDLORDS

Owning Rental Property has a number of Tax Planning Advantages vs an investment in the the stock market. Owning good rental real estate is has been an excellent way to build LONG TERM wealth. So what if you are a new investor - can you still build wealth in real estate? 

Owning Rental Property MAY help you manage some of your tax obligations - as you will have opportunities not available with other investments to write off on your taxes, a portion of your taxable income against the property.

 DEPRECIATION

Investment property owners get to write off the rental property over a period of 27.5 years while the depreciation on commercial property investments is 39 years. 

WHAT IS DEPRECIATION? A provision in the tax code whereby you write off the cost basis of your purchase over time AGAINST your income. 
Yes, DEPRECIATION IS AN EXPENSE.

Rental Property owners get a number of tax deductions that the ordinary homeowner does not get. For example, losses generated from income producing rental property may offset gains small landlords earn from other sources. Learn more about Schedule E and learn about TAX DEDUCTIONS FOR LANDLORDS on Rentlaw.com.

Almost ANYTHING you purchase FOR YOUR RENTAL PROPERTY may be written off - either in the year of the purchase or over time - depreciated over a given period depending on the type of purchase. Check with tax advisor.

While major renovations are depreciated, REPAIRS are not depreciated and are deducted as an expense that year.

Mortgage payments and all real estate taxes paid - are deductible. Every cost to run the property is an expense - either in the year the funds were spent or over a period of time. This is NOT the case for the average homeowner.

So being able to deduct the cost, or a percentage of, of items you purchase for your rental property is one major advantage over a regular homeowner.

 Expenses Paid by Tenant

If your tenant pays any of your expenses, the payments are rental income. You must include them in your income. You can deduct the expenses if they are deductible rental expenses. See Rental Expenses in Publication 527, for more information.

 1031 Property Exchanges

A 1031 Exchange is  method to shift or reduce your taxes by investing in another "like" property.  

For example, if you currently own a rental property in Texas and decide to move to Florida, you may feel you can no longer manage a property in Texas while living in Florida, but you don't want to pay tax on a sale of the property in Texas. 

You may decide to sell the Texas property and buy another rental property in Florida. The all or part of the gains (if there are) may be rolled over to  the new rental property in Florida.  This is just one example. Speak to your Tax Advisor for more information on 1031 Exchanges or Read more on 1031 exchanges.

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