Tax breaks?

[Ross Ellington]

Good afternoon everyone! I'm new to REI and was wondering if any of you would share with me any tax breaks that you know of or implement in your business. I don't know if it matters, but my goals are to buy, reno and rent out long term. Thanks in advance for any help!

[Paul Sundin]

Even though your question is broad, I can give you an overview of some deductions available to rental property investors.  

As a general rule, you can deduct any ordinary and necessary expenses in order to advertise, maintain and administer your rental property activities.  Here is a rundown of some of the basic types of expenses:

• Advertising expenses. Advertising expenses can include things like paying for newspaper or online for rent ads, paying for signs that say ‘for rent’ and even paying for an advertising company to promote your properties.
• Cleaning and maintenance costs. These costs could include the supplies you need to maintain or clean the property yourself or if you hire someone else to do the job for you.
• Commissions paid. If you use a real estate agent to manage your properties, then the commissions you pay to them are tax deductible.
• Depreciation (a non-cash expense)
• Insurance costs. Insurance costs can include property insurance or other types of insurance that are required for a rental property.
• HOA fees.This would include all fees and assessment.
• Interest.Specifically as it relates to mortgage loans secured by the property.
• Legal & professional fees. This can include attorney fees as well as court costs and fees related to inspections.
• Management fees. If you hire someone else to manage your property or rental activities then you can deduct the fees.
• Taxes. This would include property taxes and local rental taxes and assessments.
• Utilities.This would include water, sewer, electric and gas.

But there are also some overlooked deductions for rental properties that you may be able to claim. Some examples of these deductions include:

• Telephone and Internet. These would be services that you pay to either promote, manage or advertise your rental property.You may need to allocate the expenses between business and personal use.
• Office expenses.These would relate to your home office including stationary, office supplies and postage as long as they relate to your rental property.
• Local transportation expenses. This would include a mileage deduction that you would take to visit and maintain the property.
• Travel expenses. These expenses can have anything to do with travel, whether you needed to visit your rental property to check on deferred maintenance or if you just wanted to make sure that the parking lot was free from snow. You may also be able to deduct the travel costs associated with real estate conferences, courses and camps that you attend to further your knowledge.These expenses count as deductions, as long as they are not overly extravagant.
• Interest on credit card debt. As long as the interest is on balances that were derived from rental property activities it is deductible.
• Education and books. These are purchased to further your understanding of rental properties and property management.
• Equipment rentals. Could be for a copy machine or equipment used at a property.
• Professional dues. These are for investor groups or property associations.
• Accountant fees. Fees associated with tax advice and completing tax returns.
• Subscriptions. This includes magazines and newsletters having to do with real estate management or purchasing properties.

Hope this helps!