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Today’s economy has hit the real estate industry the hardest. To keep up, property owners engaged in the real estate business rent out property instead of assuming the losses due to the depreciation when they opt to sell real estate property. Realtors look at the rental business as a temporary thing, waiting until the economy removes itself from the slump it is on and real estate prices recover. What they may not know is that renting out property may be far better than buying-developing-selling business. Amongst the numerous benefits of renting out property are its numerous tax deductions that may not apply to buy and sell businesses. The following are some of the several deductions allowed for rental property:
Repairs
Repairs done to the property can be declared as deductions for tax purposes on the year that the repairs were made. Provided, that these repairs are ordinary and necessary like repair of floors and roofing and not if the repairs are meant to increase the rental value of the property. Make sure that the receipts specifically indicate what kinds of repairs were done.
Interest
Interest rates from loans such as mortgages or credit cards that were used towards the rental property. Examples of such are those used to pay the services like for repairs mentioned above, also including repairs for increasing the rental property. Take note that only the interest actually paid is deductable.
Travel expenses
Expenses for purposes of conducting rental activities like dealing with a tenant’s complaints or purchasing materials for repairs are also deductible. You may declare the actual expenses incurred or use the standard mileage rate, provided you have used such method for the previous years. Travel expenses include gasoline and vehicle repairs for local travel. For long distance travels, fares, hotel bills, meals and other necessary expenses are deductable.
Operating expenses
The office space and workshop you use for the rental business may also be deductable. Including the wages or salaries of employees you hire for any activity in relation to the rental business, includes managers and even repairmen. Also included here are for when you hire professionals such as lawyers or accountants. Provided, that the services they have rendered have a relation to the conduct of your rental business.
Insurance
For any insurance premium you pay as long as it is in relation to the rental property may be declared as your tax deductions. This includes property insurance against fire, theft and similar events or even employee’s health or life insurances. Aside from being able to recover from your insurance for any loss covered by the policy, any damage caused to the property may be declared as a tax deduction as well. Including here would be damage due to floods, fire or theft. However, how much you can deduct may be governed by how much you are able to claim for the insurance policy.
Depreciation
Probably the most basic tax deduction that is most often ignored by landlords is the depreciation value of the property. This will total to the whole value of the rental property but will be deducted in staggering amounts throughout a certain number of years. The rationale for this is that, due to the normal wear and tear that a property is subjected to, the value of the property depreciates.
For all the landlords out there, do not miss out on the opportunity to maximize profits that the tax season offers. Make sure that you deduct all those applicable to you and your property.
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Article Source: ArticlesBase.com – Rental Properties Offer Tax Deductions
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