We hope you’ve been keeping good receipts this year, because tax season is upon us. While paying taxes is no one’s favorite thing to do, buy and hold real estate investors have reason to celebrate this season, because the US government offers a variety of tax deductions to rental property owners. Here are just a few of the ways that you can lower your tax burden for fiscal year 2014:
(Note: We are not accountants, and the information provided below should not be construed as tax advice. Be sure to talk to your accountant to make sure you’re getting all the appropriate breaks and deductions on your rental real estate property.)
- Interest on your buy and hold loans
If you have a mortgage on your rental real estate property, you can deduct the loan interest from your taxes. For most landlords, this will amount to your biggest single tax deduction. As a landlord, you’ll be able to deduct both primary and secondary mortgage interest, any credit card interest on items purchased for the property, and mortgage points for purchasing or refinancing a rental property.
If you have any employees who help you run your property, a vehicle that you use for property business, or if you were subject any permit or inspection fees, you’ll be able to make a few more deductions. Your state, county, and city taxes; Social Security taxes for employees; vehicle taxes; and permit and inspection fees are all deductible.
- Property depreciation
While the land that your property sits on will likely increase in value, the structure itself will likely depreciate. The annual depreciation of your rental property structure, of any improvements made to the property, and of any equipment or technology used for the property can all be deducted from your tax burden.
- Repairs and maintenance
Any repairs or maintenance costs that hampered your rental real estate investing plan are actually a benefit during tax season. Money spent on plumbing repairs, air-conditioning repairs, labor costs, tool rental fees, landscaping, new lightbulbs, janitorial supplies, pest control, and any number of other routine and emergency fixes – all of that can be deducted in your taxes.
This is only the beginning of the tax benefits that accompany buy and hold real estate. Beyond taxes, learn more about the numerous benefits of rental real estate investing in today’s market by contacting ZINC Financial.