Investing in real estate does have it upside when you see the property appreciate, and it can be very rewarding especially when there are tax benefits that is tied to it.
If you are a property rental investor and you need help determining what constitutes a tax write-off, you’ve come to the right place. Keep reading as we go over the most popular tax write-offs for real estate investors.
Here are the top 10 tax write off and deductions you can as a real estate investor, or even if you are just buying your second rental home.
Top 10 Tax Write-Offs for Real Estate Investors and Owners
According to the Internal Revenue Service (IRS), these are some of the allowable write off for any property investor, whether it is for a multi-million complex, or the small rental home down the street.
- Depreciation
- Insurance
- Interest
- Legal Services
- Home Repairs
- Contractors, or employees
- Pass-Through Tax Deduction
- Travel Expenses
- Home Office Usage
Depreciation on property
A very extremely popular tax write off for a property investors is the depreciation on the property. Depreciation allows property owners to get back a portion of real estate costs over several years. On that, property owners cannot fully deduct the cost of a single-family home, multi-family building, or other rental space in the year it is purchased.
Interest on loan for the property
Depending on how much is borrowed to finance the property, this can be a biggie as this can be one of the most significant tax write offs for property investors. Interest deduction for commercial properties can add us, or if a home purchase is made with very little money down. Deductions in this category may include interest on mortgage loan payments used to purchase or repair the rental home. Another tip, landlords can claim interest from credit cards that property owners use to buy goods or services for the rental house.
Legal services on rental property
Depending on the property, the legal expenses can add up especially if you have a legal firm on retainer to help with your property transaction. This make sense if you have lots of property investment, or have commercial property. Finding the right lawyer and legal property representation structure is critical so that you can maximize your tax deduction.
Home Repair
Every property, whether is it commercial or residential, new or old will require maintenance at one time or another. Older homes will often require more money and resources to maintain compared to newer properties due to age and wear and tear, however it is a general good rule of thumb to put 5-10% of rent towards home repair and maintenance. All the home repair and upkeep to ensure that the home is in a livable and rentable condition can be eligible for tax deduction.
Contractor, or employees
If you have a portfolio of properties, and have employees or contractor to mange the properties, then all those expenses can be expensed off. Providing services like pool service, lawn maintenance, winterizing the home, or having a property manager to manager your home
Pass-through tax deduction
The Tax Cuts and Jobs Act (TCJA) established a brand new income tax deduction for owners of pass-through businesses, which includes most landlords. One may be able to deduct up to 20% of your net rental income from your income taxes and it begins for 2018 and is scheduled to last through 2025. There are requirements to qualify such as only applying to LLC, or partnership, earn a net profit for the rental year and have a positive taxable income.
Pass-through tax deduction
The Tax Cuts and Jobs Act (TCJA) established a brand new income tax deduction for owners of pass-through businesses, which includes most landlords. One may be able to deduct up to 20% of your net rental income from your income taxes and it begins for 2018 and is scheduled to last through 2025. There are requirements to qualify such as only applying to LLC, or partnership, earn a net profit for the rental year and have a positive taxable income.
Travel expenses
This applies to investors that often invest in different states, or internationally. When traveling to check out the investment property, you can write it off as an expense. This is ideal for investors that are investing in properties in Houston, or Texas as we have seen an influx of people from California, New York, New Jersey moving to Houston of late. Do know that when you travel to acquire property, whether it is commercial or residential property can be written off.
Home office usage
The home office deduction is one of the most popular work-from-home tax deductions. Once you understand how to calculate, record, and report home office expenses, you can benefit from the home office tax write off. That can lower your income tax bill, freeing up more money to reinvest in your business. Checkout IRS’ website if you are self employed as the standard deduction is $5 per sq ft up to 300 sq ft.
Work with Apogee Properties
Apogee Properties is Houston’s Premier Property Management Company. We work and live in Houston, and our property managers are local. We’ve been in business for more than a decade, providing comprehensive property management services in the Houston region, ranging from a studio condo to a multi-family million-dollar estate. Contact us to learn more about our property management services, and what we can do for you and your commercial investment property.
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