Advice Needed on the Tax Advantages with rental income investment

[Patrick Orah]

Hello BP community, I am looking for advice confirming what I think I know about tax advantages with rental income and help filling the gaps on some of the tax advantages/strategies that I may be missing.

To begin, I believe the rental income counts as regular income (correct me if I am wrong).

What I know already about tax liability reduction strategies are (correct me where I am wrong):

• Mortgage interest
• Mortgage Insurance (PMI if applicable)
• Property Insurance
• Property taxes
• Property depreciation
• Property HOA (if applicable)
• Property capital and maintenance expenses

Questions that I have about tax reduction or write-offs:

• Can we use the debt (mortgage payment) as a write-off? In other words, if I have a principle and interest payment of $850 per month, can I use that to reduce the tax liability on a rental income of $1,800 per month?
• If the mortgage is higher than the rental income, can I write-off the loss?

Is there anything else, that may be common knowledge to the community, on what we can use to reduce our tax burden with rental income properties?

Are these tax advantages different between residential and apartment building investing?

Thanks in advance for your input.

[Ashish Acharya]

Originally posted by @Patrick Orah:

Hello BP community, I am looking for advice confirming what I think I know about tax advantages with rental income and help filling the gaps on some of the tax advantages/strategies that I may be missing.

To begin, I believe the rental income counts as regular income (correct me if I am wrong).

What I know already about tax liability reduction strategies are (correct me where I am wrong):

• Mortgage interest
• Mortgage Insurance (PMI if applicable)
• Property Insurance
• Property taxes
• Property depreciation
• Property HOA (if applicable)
• Property capital and maintenance expenses

Questions that I have about tax reduction or write-offs:

• Can we use the debt (mortgage payment) as a write-off? In other words, if I have a principle and interest payment of $850 per month, can I use that to reduce the tax liability on a rental income of $1,800 per month?
• If the mortgage is higher than the rental income, can I write-off the loss?

Is there anything else, that may be common knowledge to the community, on what we can use to reduce our tax burden with rental income properties?

Are these tax advantages different between residential and apartment building investing?

Thanks in advance for your input.

principal payment is not deductible.

There are various kinds of stuff that you can deduct.

Rather than giving you the list, first, let me say that you can deduct expenses that meet these two criteria:

1. Ordinary Course of Business
2. Necessary in the course of business

Here is the list of some of the items:

1) Mileage: any mileage that is associated with the rental activity. Use apps like MilesIQ to keep track of it. Note: If you go to the same meeting each month, you can do detail tracking for a month, and can use the same detail to estimate expenses for the rest of the year. ( If nothing changed)

2) Meals when traveling away from home - 50% is deductible unless the meal is provided to the general public (like Open houses) then it is 100% deductible. Open House - Meals and entertainment (Balloons)

3) Expenses for Meeting with investor

4) Expenses For Meeting with a realtor

5)Going to investors' meetings. Mileage and meals

6) Money paid for RE tax books is also the tax deduction.

7)Any expenses that help you with RE investment can be deducted. Eg. HOA fee - If HOA fees are not paid, the business will incur fines, so it is necessary to make a profit in the business.

8) Marketing expense and advertising

9) Cleaning and maintenance

10)Commission (Expenses like commission, abstract fees, recording fees to obtain your mortgage are not deductible but rather capitalized )

11) Insurance

12)Legal and other professional fees(Tax preparation for business, not personal part)

13)Management fee if applicable

14) Points- you generally cannot deduct the full amount the first year but have to deduct them over the term of the loan.

15) Repairs (Note always do repairs rather than improvements to rental because repairs are deductible right away and do not have to depreciate over a few years as done for improvements. Repairs do not have to be recapture when you sell the house too.)

16) Utilities

17) Pre rental expenses ( expenses incurred before finding a tenant )

18) If you use your Car: This can include- oil changes, maintenance, gas, repairs, parking, tolls, and depreciation. If you use a personal car, make sure to keep a detailed record so that CPA can prorate the expenses between personal and business. This can include- oil changes, maintenance, gas, repairs, parking, tolls, and depreciation. If you use a personal car, make sure to keep a detailed record so that CPA can prorate the expenses between personal and business.

19) Any equipment you rent for the rental business.

20) Mortgage interest and property taxes

21)There are many others and depend on specific situations.

22) home office: Also, If your home qualifies for a principal place of business for RE activity, any mileage to any rental property is deductible.