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Investment Property Tax Deductions

Tax DeductionsIRS Tax Attorneys or CPA’s can help explain all the great tax advantages there are for property investors and landlords.  Owning rental property provides some of the greatest tax advantages out there.  Did you know that when you own investment property, all the interest expenses, management fees and maintenance costs as well as appreciation of the home as an asset are tax deductible?  This is one of the reasons very wealthy people tend to invest large sums of money in real estate, as it provides decent returns, exceptional tax benefits, and an added potential for residual cash flow.

Let’s look at some of the tax benefits landlords can take advantage of when owning investment properties.

  • If a mortgage or other type of loan is used to purchase an investment property, the mortgage interest paid on the loan is tax deducible.  Points paid on a mortgage loan are also deductible, but generally spread out over the life of the loan instead of deducted in the first year like on primary residence mortgage loans.
  • Insurance premiums paid on the home are tax deductible for the year they are paid.
  • The purchase price of the home is tax deductible and spread over 27.5 years.  For example, if you paid $150,000 for a home, and $50,000 of the purchase price is the land value, you deduct $100,000 over 27.5 years, or $3,636 a year.
  • Maintenance repairs made to keep the home in an acceptable condition for rental purposes is also considered a tax deduction.
  • Management company fees are also considered a tax deduction if fees are paid to manage, maintain or assist with the landlord responsibilities of the rental home.
  • Mileage driven to the home for maintenance, showings, collecting rent, or conducting repairs can be deducted using the per mile calculation each year designated by the IRS.
  • Legal and tax preparation fees associated with the investment property can be a tax deduction as well.

After reviewing the list of tax benefits available to real estate investors above, it becomes apparent why so many investors look for real estate opportunities.  The list above is not conclusive, and the tax laws regarding investment properties changes yearly.  Consult with your IRS Tax Attorney or CPA to find out all the advantages that individual property investors can take advantage of.

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Comments (3)

  1. ning says:

    I am thinking of buying a house as investment, either rent it our or resale it after the fixup.
    My question is will the real estate tax I paid during the holding time when I rent-out or fixing-resale, be calcurted as my investment expense? In other words, if I paid $100,000 for the house and $10,000 for real estate tax during two years, will my expense added up as $110,000?
    thank you

  2. admin says:

    Yes, real estate tax is included in your investment expenses and should be deducted. Usually you do this on a yearly basis in on your investment income tax section of your tax form. Please always check with a certified tax advisor to get the latest rules and regulations.

  3. sheba says:

    If I bought a house for fix-up and resale, incurred some traveling and maintance expense, can I deduct that on Sch A, too? This property is not meant for rental activity, but I’m having problems selling it right now, so I have to constantly travel to check on it once in a while. How can I deduct misc expenses for maintenance of this property that hasn’t produced any income yet? Thanks.

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