Investment Property: Just How Much Can You Write Off on Your Taxes?
You’ve probably heard it before, but real estate is one of the most lucrative industries to invest in, allowing you to safely grow your financial portfolio in a fairly stable industry. Among the many financial benefits is what you can write off on your taxes each year as an investment property owner. While investing is a big move, you’ll reap the benefits for years to come. Read the following post to find out what you’re allowed to write off on your taxes as an investment property owner, according to irs.gov.
If you collect rental income from your property, there are a variety of expenses you can deduct when it comes time to file your taxes. These include mortgage interest, property tax, repairs, depreciation, and operating expenses. In short, the money you spend making repairs to your rental property (such as flooring, walls, structural repairs, etc.) can be deducted. So on top of filing all of your property taxes and mortgage interest, be sure to keep track of any and all documentation regarding repairs. This can save you a lot of money at the end of each fiscal year.
According to the IRS, you may also deduct “ordinary and necessary expenses” for maintaining and managing your investment property. Ordinary expenses refer to common costs that are generally accepted by the industry, such as interest, taxes, maintenance, advertising, insurance, and utilities. You’re also allowed to deduct costs of common materials and supplies that allow you to keep your property in prime operating conditions. Again, it is important to keep track of all documentation regarding your property, so that when tax time comes, you’re covered to deduct as much as possible.
As an investment property owner, you may also deduct expenses paid by the tenant, if they are considered “deductible rental expenses.” Defined by the IRS, “When you include the fair market value of the property or services in your rental income, you can deduct that same amount as a rental expense.”
What You Can’t Deduct
Fortunately, you can deduct a majority of your expenses as an investment property owner. However, there are some things that the IRS will not allow you to deduct. The biggest thing you cannot deduct on your income taxes is improvements. While repairs and maintenance
supplies are allowable deductions, anything that increases the value of your property, or results in the “betterment, restoration, or adaptation to new or different use,” is not.
About Precision Realty and Management
At Precision Realty and Management, we know investment properties. We have been a Houston-Leader in managing and helping maintain rental homes since 1989. If you have investment properties in need of hands-on management, contact our team of skilled property managers today. Visit https://www.precisionrealty.com/contact-us/ or call 281-866-7400.