Tax laws are incredibly advantageous to those who invest in real estate, and you could pay little to no taxes through optimum maximization of these laws. It is vital to understand the advantages of leverage regarding real estate investments and tax laws. Be sure that you are following the guidelines so that your deductions pass the scrutinization of an audit. It is best to have a method in place to keep your receipts organized as a standard practice. There are many organizational tools, or you could take advantage of technology. There are apps to assist you in making the most of these deductions, such as mileage trackers, making the task easy.
With proper planning, you can roll losses over from your LLC investment business as a tax write-off on your tax return, lowering your income taxes. Keep in mind that tax laws change often, and you should always run the details by a professional specializing in real estate investment tax. We will explore the top tax deductions for your investment property.
Business Startup Costs
You must meet two criteria to take tax deductions for your investment property start-up costs. Firstly, the expense you had to pay to begin operations must qualify under the rules as if you already owned the property as an investment. Secondly, you must incur these costs before the property is in service towards earning income.
The IRS allows tax deductions for your investment property for depreciation, which will enable you to bring the value of the property down on paper to zero over a specific period, broken down by year. Generally for 39 years on commercial property and residential property over 27.5 years. The significant part about depreciation is that the loss or deduction is not actually out of pocket.
According to IRS guidelines, if you are paying interest on debt, be it the mortgage, a loan, or credit card related to the investment property’s care, you can deduct the interest from your taxes. Be careful that these expenses are not associated with improvements that add value to the property.
You can also write off the property taxes on your investment property. Unlike personal property, there is no cap on this write-off as it is considered a business expense.
Any utility expenses, such as water, garbage collection, sewer, and the like you pay on your residents’ behalf, are tax deductions for your investment property.
You must distinguish between making improvements, which will add value and income and are disqualified, and making necessary repairs, which are allowed as tax deductions for your investment property.
Routine maintenance costs are tax deductions for your investment property. On average, maintenance costs equal about one percent of the value of the investment property per year.
HOA fees are considered tax deductions by the IRS for your investment property. You will want to take note of how you approach deducting assessments for improvements to the property. You may be able to take depreciation on the added value.
Any type of insurance payment incurred, such as fire, theft, or fraud, is considered a tax deduction for your investment property. Additionally, any health or workers comp insurance for your employees would be deductible as well.
Professional Organization Dues
Suppose you are self-employed, ensuring that the organization or club is business-oriented and not considered a social gathering. It must be ordinary to your type of business and specific to a profession or trade group. In that case, you can take the total amount of any membership fees or even subscriptions as tax deductions for your investment property. You can also deduct these expenses paid for your employees. Likewise, joining other organizations to promote your own business is allowed.
Books or courses to learn more about your business, within limits, are additional tax deductions for your investment property. These must be incurred after the company’s start and apply strictly to improving your existing skills for your business.
Whether you travel local or long distances to manage your holdings, you can deduct the costs as tax deductions for your investment property. It is advantageous to note business mileage and maintain copies of your business receipts daily. These expenses can include a rental vehicle, fuel, hotel costs, and other travel incidentals.
You are allowed a deduction per square foot for qualified office space to manage your investment property. This space must be strictly dedicated to business use and also be your principal place of business.
Modern Properties Solutions makes it easy! When you are ready to invest and take advantage of these tax deductions, Modern Properties Solutions has the best investment property inventory available right now. Give Modern Properties Solutions a call at 888-991-1176 or send us a message!