Are you a landlord? Yes, we understand that your work can be quite frustrating at times, but there are also many perks associated with it. You cannot ignore the fact that you are getting a significant amount every month based on the number of homes you rent. So is this the only perk or are there other advantages as well? Yes, there are. Landlords get to enjoy so many tax benefits.We talked to a number of skilled accountants and all of them agreed on the fact that being a landlord can be good for your taxes and help you in paying lower amounts. Below we provide a few tips they gave us for utilizing your tax advantages:
Claiming Your Deductions
A reputed tax professional told us that landlords can claim a number of deductions. We are pretty sure you know about deducting the interest you pay on your mortgage and property taxes. So what else can you utilize as a deduction? Your mortgage points, but you will have to spread them throughout the loan term if you acquired a loan before the current tax year. You can also deduct operational expenses such as repairs, insurance, utilities and the like. All of these add up to a significant amount. That’s not all, read on.
You can deduct the depreciation cost of your rental unit. Assuming your property costs around $200,000 when you exclude the land. Depreciation occurs at the rate of around $7,000 on a yearly basis. You can remove this amount from your taxable income, and it will significantly reduce the amount you will owe. Own several properties? You have a better advantage than other landlords.
Passive losses are not that bad
If you have not been a landlord for very long, you will incur negative taxes in the early years when your deductions become greater than your rental income. Once your income accelerates, it will become more than your deductible expenses and you will have to pay taxes on these profits. At this time, you can use passive losses to offset your profits and pay lower taxes.
Planning to sell?
Naturally, you will have to pay taxes, but you can enjoy a reduced tax rate if you fulfill certain requirements. Contact your accountant to help guide you through the sales process so that you can benefit from all the tax benefits.
Source: www.aoausa.com
