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9 Tax Deductions Rental Property Owners Don’t Know About!

by Vivek Patel Local Search Analyst
Income tax breaks on rental property can add up to huge savings, making your investment more profitable. However, few people are aware of the tax deductibles they can benefit from. If you intend to invest in property, here are 9 benefits you should know of!

Interest on Home Loan

A major part of your loan payment goes to repaying the interest. Conversely, a minor sum goes to the principal amount. This shouldn’t worry you as interest is tax deductible. You get to avail benefits on primary and secondary homes!

What else is deductible? Interest calculated on purchases related to the rental property!

Insurance Premium

Landlords need to insure property they own. Moreover, lenders require mortgaged property to be insured. Premiums paid for liability and casualty can be deducted from income tax. Owners also get a tax benefit on other premiums paid for any rental activity.

Depreciation of Property

Cost of rental properties can be recovered through depreciation. This accounts for wear and tear of properties. But there are quite some restrictions!

Note that the value of land is not depreciable. Only the structure’s cost can be subtracted as depreciation.

Repairs and Maintenance

Costs related to repairs and maintenance can be fully subtracted from tax. In addition to this, costs can be deducted in the same year they are incurred. You can only benefit if the services carried out were essential and ordinary!

Repairs can include repainting and plastering. Replacing broken windowpanes also falls under regular maintenance.

Large-scale changes count as capital improvement. Examples are replacing the entire roof or flooring. Under this, the deduction will be spread out over multiple years. This will be similar to depreciation.

Hiring Contractors

Any property requires upkeep and ongoing maintenance. Landlords can get a tax deduction for hiring employees to maintain rental property. Hiring independent contractors for maintaining the property can also earn you tax benefits. Maintenance tasks might include cleaning, painting, landscaping, etc.

Hiring Attorneys or Accountants

Fees charged for services related to the rental property are classified under operating costs. These include legal, accounting, and management services.

Landlords may hire a management firm to handle their property, or employ independent accountants or attorneys. Costs for these services are tax deductible, but benefits are applicable only for activities related to the rental property.

Travel

Travel costs related to rental business are tax deductible. This includes both local and long distance travel. Landlords might travel for meetings with prospective tenants. They might even have seminars to attend sometimes! Trips to hardware stores for purchases related to the rental property are also covered. Travel expenses for market research are deductible too.

Suppose you stay around Berkshire and own property nearby. You might need to travel frequently to your Wellington College home. Landlords get to deduct expenses for overnight travel. These include airfare, meals, hotel bills, and more!

Losses from Accidents and Theft


If there is accidental damage to property, owners can have the losses deducted from tax. This is for natural calamities like a fire or a flood. If your property is damaged due to criminal activity, you can get a tax deduction for the loss.

The tax benefit you can avail is co-related to the level of damage to your property. Another factor is insurance coverage. Expenses not covered by insurance are paid on a claim.

Home Office Setup for Rental Business

Setting up an office in your home shouldn’t be much of a headache. That’s because the costs related to it are tax deductible. But you’re eligible for tax benefits only if you run a rental business in that space!

Bear in mind that the deductible percentage is not fixed. The tax benefit you get depends on the size of the office in relation to the total area. Other specific rules apply in this scenario too.

Conclusion

Tax deductions can lure people into the property investment business. While property investment can give good returns on investment, it is a tough nut to crack. Before making any decision, analyse the market and consider potential gains. It’s advisable to consult an expert first so you know exactly how to proceed!

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About Vivek Patel Junior   Local Search Analyst

4 connections, 0 recommendations, 18 honor points.
Joined APSense since, January 24th, 2018, From Ahmedabad, India.

Created on Mar 8th 2018 03:36. Viewed 530 times.

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