Tips on Rental Ownership Tax Breaks by Tony Martinez
Tony Martinez is the Founder and Chairman of the US Tax Lien Association, which is an organization that is committed and dedicated to helping others achieve total financial freedom through the power of investing in Tax Lien Certificates. With over 30 years of expert experience, Tony is the world's #1 authority on the subject of creating enduring wealth through the little know strategy of investing in Tax Lien Certificates, which gives anyone the opportunity to earn guaranteed fixed rates of returns of 18% – 36% interest per year, and acquire valuable real estate for approximately 10% of market value.
Owning and operating rental properties is not for everyone. For those who do have the patience to to manage rentals; taking advantage of allowable tax breaks or deductions will heavily affect your bottom line. There is more to owning a rental property than just collecting rent on a monthly basis. You need to make an effort to reduce your tax liability. With that in mind, I have curated a few tips listed below that will keep more money in your pocket at the end of the year.
Deduct ordinary and necessary expenses - Well, what are the ordinary and necessary expenses? These are expenses that are widely accepted as common in the business of operating a rental. You can deduct insurance, taxes, maintenance, advertising, interest, and utilities.
Keep organized records - To avoid missing a deduction, be sure to keep records of all of your expenses. This includes receipts, dates, and reasons for the expenses. There are various programs out there that can help you with this. But for many of us, keeping a log and a good old fashioned file cabinet is perfectly sufficient. No matter your methods, this is important.
Depreciation - While you can’t deduct the cost of improvements to a rental property, you can deduct depreciation on an annual basis. Depreciation is allocating the cost of purchasing and improving rental property. It’s not really the deterioration of a home or rental over time; a definition you have likely heard before. Depreciation helps distribute these costs over the lifetime of the rental. The IRS allows a certain annual depreciation percentage, usually 3.485%, while the rental is in operation.
This Topic is of course intricate. Keep in mind there are no secrets and mysteries to investing. There is only hard work and study. Take the time to research and master your chosen field of work. The information is out there, you just have to make the effort to find it.