May 24, 2024


Mad about real estate

Tax Benefits of Rental Properties

Most of the time, homeowners aren’t aware of the number of tax benefits they can get on their rental property. If you have requisite knowledge about the different tax deductions, you can easily spin profit from your properties on rent. Here are some important aspects of rental properties on which tax benefits can be availed.

  • Interest of home mortgage- You must have taken a home mortgage to buy your rental property. If you still paying it back, then you can deduct the monthly mortgage interest installment from the total amount of tax you pay for your house on rent. Likewise, if you have taken a home improvement loan to finance maintenance and enhancements in your home, then too you can subtract monthly interest payment amount from the total tax applicable on your property. There are several instances when you use your credit card to buy different goods and services for your rental property. You can easily avail tax benefit on all such purchases.
  • Depreciation- How old is your rental property? If it is 27 ½ years old, then you can take advantage of the tax benefit associated with deprecation. As the time passes by, the value of the house, excluding the land, depreciates. For instance, if you purchased the house for $400,000, then the yearly depreciation would be $14,545. These same holds true for commercial properties, provided they are 39 years old.  
  • Insurance- Homeowners insurance is a necessity that cannot be avoided. However, it can also help you to save some money. Whatever annual premiums you pay for home insurance are fully deductible from the total tax payable. Furthermore, if you have employed a few persons to help you manage your rental business properly and you have provided them health insurance, then the premiums of these policies are also deductible.  
  • Casualty and calamity- There are innumerable factors that have the potential to destroy your rental property like floods, earthquake, tornado, theft, fire, and so forth. To get tax benefit on such causalities, subtract the cost of the damaged portion of your house from the total tax amount.
  • Maintenance- You can claim tax deduction on regular maintenance work that you undertake to keep your property prim and proper. Some good examples of maintenance are getting the clogged sewer line cleaned, refurbishing the kitchen area, repainting, replacing the damaged window frame and so on.
  • Travel- The amount of money you spend to travel to your rental property is also claimed as tax benefit. This includes both local as well as long-distance travel. Don’t forget to attach supporting documents as an evidence to support your claim.
  • Home Office- If you run a home office to manage your rental properties, then also you gain eligibility to ask for tax benefit. The deductions are applicable on both home space and workshops that you use to manage your business.
  • Fees and salary- All the employees, accountants, ushers and attorneys who help you to run your rental business smoothly also provide you tax benefit. Whatever, salaries and fees you pay to them is completely deductible.