It may be noticed that every year most of the landlords of rental property have to pay more taxes than usual. The question which arises here is that, why and is there any way to reduce taxes? This may be because they forget to take benefits of all property tax deductions. That’s why, here in this article, you will get to know about to 8 tax deductions that will help you to reduce your taxes in the future.
Table of Contents
Depreciation Of Real Rental Property:
The actual value of a house is not fully deductible in the specific year in which you pay for it. However, landlords can take advantage to get back the cost of real estate through depreciation. You can visit Capital Claims if you need more information about rental property tax depreciation.
Interest:
Interest can be considered as the landlord’s most deductible expense. The most common tax deductions in the rental property include mortgage interest payments on loans which are used to acquire or improve a rental property.
Repairs:
There is another deductible tax which is the cost of repairs. The cost of repairs is fully deductible in the particular year in which they are incurred. Some excellent examples of repairs include repainting, fixing leaks, plastering and removing old windows.
Personal Property:
By using de minimis safe harbour reduction, you can deduce the cost of taxes on your personal property. The only condition is the property must be costing above $2000. Personal property includes furniture, electrical equipment, gardening equipment and many more.
Pass-Through Tax Deductions:
According to the Tax Cuts and Jobs Act, most landlords will qualify pass-through tax deductions. Pass-through tax deductions are not a rental deduction, but it is a particular type of income tax deduction. This type of deduction is scheduled to expire after 2025.
Employees And Independent Contractors:
If you hire someone to perform services for your rental activity, then you can deduct their salary as a rental business expense. It can be anyone, whether the worker may be a manager or a contractor, or anyone.
Insurance:
Now, you can also deduct the premiums that you pay for the insurance of your rental property. This includes theft, fire, flood insurance, and landlord’s liability insurance. Also, if your company has employees and workers, then you can deduct the cost of their health and workers’ compensation insurance.
Legal And Professional Services:
You can also deduct fees that you pay to property management companies, accountants, attorneys, real estate consultants and advisors, and other professionals. You can only deduct the costs as operating expenses as long as the pay is related to the rental activity.
Rental real estate property investment provides more benefits than any other investment. And the most important point to note here is that these small benefits will make a huge difference between making a profit and losing money on rental property. Therefore, read all the points as mentioned above very carefully to take advantage of all the tax deductions.