Being a property investor or a landlord has it’s benefits and can open the door to a tremendous amount of tax deductions and credits if you know what to look for. Taking advantage of all the tax benefits that are offered to you can make a significant dent in your tax bill. But surprisingly, many landlords are unaware of just how many benefits there are.
Of course, every case is different and how much you stand to benefit will vary depending on things like your filing status, tax status, tax bracket, the number of properties you own and how you structured your investment.
Taking full advantage of the tax code can require expert advice and if you aren’t an experienced property investor it is highly recommended. Knowing the right way to structure your investments is also of high importance.
Some of the taxes that landlords are required to pay include:
- Income tax on rental income and property sales
- Social Security and Medical taxes
- Net investment income taxes
- Property taxes
Each of the tax responsibilities listed comes with its own list of specific attributes that must be adhered to in order to remain within legal guidelines. The IRS provides definitions for each and your tax professional is also aware of their meanings and applications.
On the other side of the coin are the deductions that are available to landlords. The law allows you to subtract operating expenses for your rental including repairs and maintenance. In addition, there are other deductions that are available, they include:
- Mortgage interest
- Interest on other loans
- Professional Services
- City and State taxes
- Travel costs
There are also detailed definitions for these deductions available through the IRS or a tax professional. In many cases, landlords who are able to apply many of these deductions can end up showing a net loss at the end of the year which can be a clear advantage. See you tax professional and make sure you are taking advantage of all these deductions.