Rental Property Tax Deductions

Posted: March 27th, 2009 | Author: admin | Filed under: Rental Property Ideas | Tags: , , | No Comments »

Rental property investment is one of the most popular investment options in recent times. As it is, it has been able to generate a lot of attention in the current scenario. However, it needs to be mentioned here, that all your rental revenues are taxable, under provisions of the IRS. However, you can avail a number of tax deductions, which can be availed by you, to reduce your tax burden.

The Internal Revenue Service, or the IRS, offers a number of tax benefits to holders of rental property. As a holder of rental property, you can avail these tax deductions and save a lot of money in the long run. The following are a few of the deductions, which are available to a rental property holder:

1. Depreciation on property
You are entitled to make provision for deduction on your rental property.  This amount of depreciation is allowed as deduction, for the calculation of tax. However, depreciation covers only the value of construction and not that of the value of land.

2. Mortgage interest deductions
As a rental property holder, you are entitled to a deduction on the amount, which you have paid as interest for the mortgage on the rental property. However, you can not get a deduction on the amount paid as part of the principle amount.

3. Deduction on Insurance premium paid
Deduction is also allowed on the amount of premium paid for the insurance of the property. However, it only covers the premium paid in the relevant financial year. Therefore, any advance payment, would not be eligible for deduction.

4. Deduction on Repair works
As per IRS guidelines, a holder of a rental property is entitled to tax deduction on the value of repair works, which have been carried out on the rental property. As it is, your rental property would need regular repairs, as it is not just an asset for you, but also a source of earning for you as well. This amount that you would spend on the repair of your property can also form a basis for tax deduction.

5. Deductions on legal expenses
You are also entitled for deduction on the amount paid by you in the form of legal expenses on the rental property. So, the fees that you have paid to your real estate attorney, is also eligible for deduction, provided, such expenses have been carried out in the relevant financial year.

6. Deductions on other professional services
You are also entitled for deduction on amounts, which you have paid for other professional services, such as payments to accountants, realtors etc. However, such payments should have been paid in regard to the rental property and not for any other purpose.

As it is, apart from the above, other deductions, like that of transport and communication expenses incurred on the rental property, or for the purpose of collecting revenue, are also eligible for tax deductions. These deductions help a lot in lowering the tax burden from your shoulders.

Investment in Rental Property

Posted: January 7th, 2009 | Author: admin | Filed under: Rental Property Ideas | Tags: , , | No Comments »

With a rapid growth in the real estate sector, there has also been a rapid growth in rental property investment. As it is, many people are using rental property for their advantage.

The modus is quite simple. A real estate investor, buys a property, whether by cash, or by way of home loan. After that, he puts this property on rent. While the rentals received on this property are enough to take care of a major portion of the repayments due on the property, the landlord enjoys an appreciation in the value of the real estate as well.  In case, if the property has been paid fully in cash by the landlord, then in that case, the rentals received on the property are pure profits.

However, investment in rental property is after all a real estate investment. Therefore, you can not just do in a casual manner, since it involves a huge amount of money. You should therefore, take great care before you buy a property. The following are some of the aspects, which need to be taken care of, while making investment in rental property.

First and foremost; before you buy a rental property, you need to do some prior research. Nowadays people are flooded with a number of options where they can gather ample information about rental property investment investments you can take the help of relevant books, which deal with investment in rental property investment.

You also have the option of going through various news papers, which would give you a brief idea of the current trends, prevailing in the market. You can also get in touch with other investors, which would be helpful for you to gain through their experience. In most probability, such investors would be more than glad, to share their experiences with you.

Initially it would be a good idea to take the help of a real estate agent. A real estate agent can be very helpful in finding properties or homes of great potential value. However, what you should always keep in mind is that you should take care to find a realtor who can actually help you get the best deals.

Make sure that your realtor should not only be very much familiar with the market conditions, but also possesses  the expertise to bag you the best deals available in the market. You must always remember that since it is a very crucial aspect, therefore you do not need to rush in. Patiently seek out for the best available options in the market. You may also consult your friends and relatives. They can prove to be quite helpful in getting across a good realtor.

While making an investment in rental property, you must always take care of a number of aspects, such as location of the property, price of the property, legal aspects associated, condition of the property etc.

Rental property investment involves huge investment. Therefore, you need to keep every aspect in mind, before you buy a property.