The financial aspects of real estate investing go well beyond the basics of rental income or the cost of purchasing and maintaining the property. In order to make the most of your investment, a landlord should be sure to consult a tax professional and explore the vast tax benefits of rental property ownership. Some tax deductions that may be available are:
1. PROFESSIONAL SERVICE FEES
Real estate investors often look to maximize benefits or avoid exposure to risk in dealing with their investment. To that end, a landlord may employ the services of one or more of the following:
• Property manager;
• Real estate broker; or
• Investment advisor
Now, this list isn’t comprehensive, but fees paid for professional services are likely to be tax deductible as long as they are related to your real estate investment/rental activities.
Insurance can be costly. It’s one of those things that most people don’t want to pay for but they are always glad they did (pay for it) when they need it. On the upside, landlords are permitted to deduct the cost of premiums for fire, theft, and flood insurance as well as the cost of liability insurance for policies related to their rental property.
Driving as related to your rental activities is a deductible expense and it especially applies to the hands-on landlord. It may not seem like much but this deduction can really add up. Think of the countless times you will drive to show your property to a prospective tenant or supervise a repair. You can take advantage of this allowable deduction by totaling the actual expenses (such as gas and vehicle repairs) or use the standard allowable mileage rate.
The costs associated with rental property ownership do not begin and end with the purchase. In order to maximize the investment potential it is wise to maintain the property. The costs related to ordinary and necessary repairs of the income property can be fully deductible.
Always save the best for last. Mortgage interest is frequently the largest expense associated with rental property ownership—the good news is that it is tax deductible.
Again, it is important that any real estate investor consult a tax professional to explore the advantages of rental property ownership and ensure that any tax deductions are allowable. The nice thing is that the tax consultation is going to be tax deductible.d