It doesn’t matter whether you’re renting out a unit of apartment or you manage the rental of entire properties. Deductions are real, and there are a few of them you should know about:
- For one, your residential property, if not rented out within a 27.5-year timeline, runs the risk of being depreciated, which can eat into your returns. Skipping your depreciation attracts steep penalties that could last a long time.
- Mortgage and real estate taxes also fall into this category. But, expenses incurred to get a mortgage are not deductible. They only increase your basis in the home you purchased.
- If it’s not a huge sum, the cost of repairs incurred is also deductible. But if the amount involves a huge sum, there are ways to go about it. One of them is by capitalizing the costs and depreciating them over the useful life
- For professionals and agents that are into full-time real estate, loss from rental properties can also be used to pay up ordinary income. However, this may not apply to you if you work a full-time job that is not in any way related to real estate. To learn more about other ways you can deduct, and how much, kindly contact us.
- Getting an LLC for your rental property is also a smart step to limit personal liability while you keep your personal and business expenses as two separate affairs as far as tax is concerned.
- If you live in some jurisdictions, you may also be liable to some local & state tangible property taxes.
- Income accruable from rentals can come under the 20% Qualified Business Income Deductions, in which case it will be deducted.
If you’re in need of more tax tips for landlords or professionals in the real estate industry, contact us. Rental properties are just another of our service offerings to our clients. On numerous collaborations, we have been able to develop personal and professional experience both for our clients and our personal rental income properties.