How to save money On your rental property taxes
Owning a rental property can be expensive at times but there are many ways you can save on your taxes as well. Landlords are allowed to deduct any expenses incurred in the maintenance and managing of their rental properties. The main deductions are:
Necessary and repairs to the property
Travel costs related to the property
When you repair or maintain your property you can deduct the wages you paid out to your workers/independent contractors. The list of fields such as:
Where do you go to keep track of your rental property? Do you have an office? Well, you can deduct that from your taxes as well. The IRS allows you up to 300 sqft maximum office space which you can add the square footage up and divide it from the total square footage of the home. The rate you receive is $5 deduction per square foot. The space in which you do this work must be dedicated to rental property business work.
If you do a lot of driving to visit your rental property to collect checks, do a walk through, or just check on the property the mileage you rack up on your car is deductible. As of 2017, the rate is currently $.53 cents a mile you can deduct from your taxes. There are many apps on the Apple and Android marketplace that will allow you to track your miles through the app to keep track of how many miles you rack up during travel to and from the property.
WATCH OUT FOR RECAPTURE
When filing your taxes, be sure to not try to hide the depreciation on your home as it will only hurt you in the long run. All passive activity losses that weren’t claimable in previous years, you can fully claim during the sale of your rental property to help with the tax burden of recapture. The maximum rate of capital gain taxes on the sale is 15 percent while the depreciation tax can take as much as 25 percent.
But wait! There’s something called a like-kind exchange which allows you to defer the capital gains and depreciation tax. If you sell your property and acquire some other asset such as another property, it’ll off put the taxes until a later point when you sell the new asset.
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