Real estate investors don’t want to have more expenses than necessary, and this is especially true when it comes to paying taxes. After all, with all of your other expenses, you wouldn’t want to have to be paying more than you should have when tax season comes around. However, there are a few significant tax deductions that you may not be aware of to reduce your tax bill. While you’ll have to check your eligibility for them, they can each add up to have a noticeable impact on your taxes. With that in mind, there are a few rental property tax deductions you might not have been aware of.
If you run your business from home or even just a portion of your business, then you may be eligible for a home office deduction. There are two different ways of filing for this, depending on which state you live in; the regular way or the simplified way. However, if reducing your tax bill as much as possible is your aim, the simplified method has been shown to offer better results. Before you try to get this tax deduction, however, it should be noted that your office should be used solely for business for you to be able to claim a deduction for it. As such, the likes of a bed or other pieces of furniture that aren’t tied directly to your real estate investment won’t count towards the tax deduction. (In terms of your rental, though, that’s a different story.)
This is something that’s not too obvious but has been a noticeable deductible from your taxes, as they are a typical business expense. With this in mind, the Internal Revenue Service has a section of its code dedicated to marketing and advertising expenses. As many marketing activities can be so broad, then it can quickly add up to a significant tax deduction. According to many reports, the likes of marketing materials, staging, photography, and signage can all be deducted from your tax filings; however, you should always be sure to check how much of a deduction you’re eligible for.
What many real estate investors and business owners forget is that traveling costs related to doing business can also be eligible for a tax deduction. For real estate agents and investors, this can quickly turn into a significant expense. As such, it can quickly add up to quite a noticeable tax deduction once tax season finally arrives. This is because many agents and investors will have to travel a lot for the likes of showings, listing presentations and more. Because of that, it’s one of the more noticeable and common tax deductions that are available for real estate investors and other business owners.
While your home office is one tax deduction that you can be eligible for, office supplies may also let you get a further deduction, although this may not be as significant as your home office deduction. This typically includes the likes of stationery, photocopies, and any other consumables needed to run your business; however, large purchases such as ax machines, copiers and computers can also be used. There’s also the fact that if you have a particular phone used for business. You may be able to claim a deduction based on your phone bill.
Based on the above, it should be becoming quickly obvious that you can claim a tax deduction for many of the expenses related to real estate investing. The same is also true for many of the annual fees that you may have to pay when you’re in business. With that in mind, the likes of professional memberships and any licenses that you may need about your business can be deductible. This is one of the more common tax deductibles available, and can quickly add up, depending on how many annual fees you have to pay every year. However, fees related to lobbying and political advocacy aren’t deductible from your taxes. Any insurance you take out for your real estate can end up being fully deductible.
With those tax deductions, you should be able to reduce your overall taxes significantly. Having said that, it’s worth working with a financial professional to ensure that you’re paying the taxes you need to while also getting as many deductions as you’re eligible for.