Tax time creates anxiety every year for a majority of Americans. A recent study by TaxAudit found that half of Americans feel anxious when they receive something from the IRS, and 77% find the new tax laws confusing. For the Real Estate investor, just thinking about taxes can cause anxiety.
Fear not- we are here to give some practical advice arming the reader with the courage to deal with the dreaded tax monster.
Like most any endeavor, it’s always good to seek competent counsel before venturing out into the unknown, even if it is somewhat familiar. Because you own property doesn’t mean you need to know everything about the Tax Code concerning rental properties. A good CPA with experience in Real Estate may cost a bit but will reduce stress in retaining the deductions available. Before seeking out an accountant, be sure that you do your homework and ask someone in the business for recommendations then follow up with your own check. The Better Business Bureau is a good starting point. Go to www.bbb.org to find accountants in your area. The BBB website is straightforward to navigate and intuitive. Type in what and where by zip code and voila- vetted results will appear.
One of the most overlooked aspects of the IRS is that one of their primary functions is to help the public in understanding the system. The IRS webpage has a plethora of information on every aspect of taxes for the Real Estate investor. The site is written in easy to understand language and has direct links to publications, schedules, recent developments, and is continuously updated. Click here to learn the facts about renting out residential property. It’s worth a look, and it is surprising what is considered a deduction. From ordinary and necessary expenses to improvements and depreciation it’s all listed with guidance on each.
Taxes differ for any given location; however, there are common types of rental property tax deduction and benefits, including:
- Mortgage Interest Payments
- Licensing Fees
- Occupancy Tax Deductions
- Maintenance and Repair
- Advertising and Marketing
- Homeowner Association Fees
- Auto and Travel
- Property Management
- Legal and Professionals Fees
There are numerous resources a mere keystroke away, offering advice on taxes for the property investor. Confirm that articles are recent within a couple of months because tax code can change more often than tires on a race car. Remember that keeping a solid account of each expense is paramount to ensuring proper deductions are capitalized on at tax time.