Investment properties come with many advantages. One of the main benefits is all the amazing tax deductions available to homeowners. Rental properties have more tax benefits than almost all other forms of investment. Many homeowners don’t maximize their deductions and, as a result, pay much more than they owe in any given year. Here are some of the best tax deductions to consider this upcoming tax year.
1. Depreciation
Depreciation allows you to recover the actual cost invested in your real estate. Generally, you depreciate your property over 27.5 years and the depreciation calculation looks like this:
Purchase price – Land value = Building value
Building Value / 27.5 = Annual Depreciable Value
This annual depreciable value is an actual reduction in your taxable income. For example, if you buy an apartment building for $275,000 and the land is worth $40,000, then your annual depreciable value is about $8,500 per year. That figure doesn’t even take into account interest or other deductions.
two. Trip
Local and long-distance travel is deductible from your income taxes. You are entitled to deduct travel expenses to/from your investment property, as well as travel expenses to any hardware stores or contractors while running errands for your property. There are two ways to deduct these expenses, and you should talk to your accountant to determine which is right for you.
If you take an overnight trip for your investment property, then your hotel, airfare, meals, etc. They are all deductible. If you plan your trip correctly, you could book an owners conference to Chicago and deduct most of your trip, even if you spend some of your time at leisure.
3. Sure
Almost all insurance premiums are deductible.
Four. Professional services
You can deduct fees you pay to lawyers, accountants, property management companies, and other professionals who work on your investment property. These fees are deductible as a cost of doing business.
5. interest
Interest can be a major deduction that homeowners lose. Mortgage interest payments and interest payments made on secured credit for repairs and improvements are deductible. Be sure to track these costs and maximize your profits.
There are many other deductions available to you as a homeowner. You should see your accountant for a complete list of deductions.
Thinking of buying an investment property, but not sure if it will work out?
There are many excellent calculators online for determining whether or not an investment property will be successful. One of my favorites can be used here.