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KNOW TAX ADVANTAGES ON RENTAL PROPERTIES
KNOW TAX ADVANTAGES ON RENTAL PROPERTIES
What would you say if I tell you that you can start reducing your taxable income immediately? It is not as difficult as you might think. Just get to know some few details and you would reduce your taxable income.
What is rental property?
Rental property is a property you bought to keep over a year, rented to someone else for a rental income.
What is taxable income?
This is the net of your total income generated within a specific period of time that is assessable to tax by the government.
What is allowable expense?
Allowable expense is an expense that the government permits to be deducted against the taxable income of an individual.
In case of property there are several expenses that are allowable for a landlord to be presented against his taxable income.
Repairs:
The cost of repairs to rental property can be deducted in the year they are incurred.
Especially if they are necessary and reasonable as well as documented they can be fully deductible. Examples are repainting, fixing plumbing work, or gutters, floors or leaks, or general plastering and replacing broken windows.
Travel expenses:
No matter how many times you drive out to your rental property to fix a problem, you can claim your travel expenses, which include vehicle expenses in form of gasoline, repairs upkeep. You can also claim expenses for long distance travels- hotels bills. Flight tickets and any other expense incurred during those trips.
Depreciation:
What is deductible is not the cost of your apartment building or the rental property but the depreciation on those properties. And it is deductible on a pro-rata basis yearly. Landlords can claim back the cost of their properties for several years from the IRS as they claim depreciation each year.
Interest:
This is the largest deductible expense for any landlord to claim. This interest can be- mortgage interest payments on loans used to acquire or improve rental property.
Employees [contract or full time]
Any worker you employed to perform a particular task on your rental property be it full staff or independent contractor; his/her wages can be deducted from your taxable income.
Phone costs, PO Box, internet costs related to your rental property: these cost can also be deductible from your taxable income, as long as they are used in relation to the activity concerning your rental property.
Utilities if you pay them instead of the tenant: you can claim these expenses as long as it can be proven by documentation.
Homeowners association fees: this fee is paid to the HOA and it is compulsory for each landlord to pay for the maintenance of the community. This fee is an allowable expense that could be claimed against your taxable income.
Other expenses that are allowable against your income:
Tenant credit report fees
Property taxes
Management Fees
You would do yourself a lot of good as a landlord to get yourself acquainted with your taxable right, that could save you a lot of dollars.
About the Author
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