Tax Incentives for Hampton Roads rental properties One of the main benefits for investing in real estate is for the tax advantage. I am going to go over a few of those benefits in no specific order of importance. I am not a tax professional, you will need to consult a tax professional for specific advise.
Interest The mortgage interest deduction is one of the top deductions. All of the interest paid for the year is tax deductible. The principle paid is not tax deductible. Also another one that is often missed is Credit card interest. If you were to need a big-ticket item like a new HVAC or Roof and need to put it on a credit card, that portion of interest is tax deductible.
Depreciation You get to deprecate the value of the property (not the land) for 27.5 years. An example of this would be you property is worth $100,000. Your tax advisor determined that the structure is worth $75,000 and the land makes up the other $25,000. You would take the $75,000 and divide by 27.5 for a total of $2727.27 per year. This is the amount that you can write off for depreciation. The great thing about this is while you a deprecating the asset the asset is increasing in value.
Repairs Common repairs to the property are fully deductible in the year that they are paid. Good examples of these deductions are fixing leaks, repainting, fixing gutters, and replacing broken windows. Be cautious of the difference between repairs and improvements. An example of this would be you have a roof leak and spend the money to replace the entire roof. This would be a capital improvement and needs to be deducted over time.
Out of state travel If your rental property is out of state and requires long distance travel you can deduct your airfare, hotel bills, meals, and other expenses. With the right planning you can even mix landlord business with pleasure and still take a deduction.
Local travel You’re entitled to a tax deduction whenever you drive for your rental activity. An example would be you drive to your property to look at a tenant requested maintenance, drive to a hardware store to purchase items for the property, or simple drive by the property to make sure the tenant is maintaining the property.
Home office Weather you own the home or rent the home you live in you can deduct a portion of that home for a home office providing you use that space for conducting business. Example would be writing leases or meeting tenants for lease signings.
Property management If a property manager manages your property professionally the fee that you pay that manager is tax deductible.
Legal fees You can deduct fees that you pay to accountants, attorneys, or real estate investment advisors. You can deduct these fees as operating expenses as long as the fees are paid for work related to you rental property.
Insurance You can deduct the insurance premiums for theft, fire, and flood insurance premiums as well as landlord liability insurance. Also if you have employees, you can deduct the cost of the workers compensation policy and there health care.
Written by
Eric Doud Realtor®
Doud Realty Services, Inc.
533 County St. Portsmouth VA 23704
Cell 757-573-3018 Office 757-295-8007 opt 2
FAX 888-839-4118