While being a landlord can definitely have some drawbacks, such as dealing with tenants, it is also a great way to get some wonderful tax breaks. If you own, or are considering purchasing, rental property be sure you are familiar with all of the tax laws. It is a good idea to use an accountant to file your taxes so you do not overlook any tax breaks. Read on to learn more.
- Difficulty:
- Moderate
Instructions
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1
Deduct mortgage interest and real estate taxes for your rental property each year.
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2
Write off operating expenses during the year that they occur. This includes, but might not be limited to, utilities paid by you, homeowners insurance, maintenance costs, repairs, trash removal, snow removal and yard work.
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3
Depreciate improvements to the building over several years. The amount of years you must depreciate an improvement is dependant on the cost of the improvement. An improvement to the property is anything that will increase the value of the home at the time of sale.
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4
Get tax free money every year by depreciating the cost of the building. Landlords are allowed to depreciate the cost of the building even though in most cases the value is actually appreciating.
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5
Be active in your rental business. Active landlords, those that do their own tenant locating and home repairs are allowed to take rental losses against income that they make from wages or other forms of work. Passive landlords, those who use rental agencies or property managers to run their business, can only take losses against rental income. If losses exceed income they can not be deducted on taxes.
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6
Remember business use of your home. If you have a home office that you use for managing your rental properties you can deduct a portion of your personal home's operating expenses.
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