First and foremost allow us to give our standard Realtor disclaimer when offering information that it is outside our normal scope fo work. We are not an Accounting Firm, nor are we CPAs. For details and specific advice, consult a tax professional. If you dont have a tax professional, ask us, we know some good ones....
With that out of the way, Tax season is upon us yet again. However, if you are an owner of an investment property then there is good news (well, some good news). Other than the obvious deductions you are allowed to claim by owning property (Interest paid on mortgage, Property Taxes, etc.), owning a rental property allows you take just a little more. Here are the Top 5 as we see it:
Depreciation is the decrease in value of property over time as the building structure begins to wear and tear with age. Depreciation can only be used for tax purposes on rental properties; you cannot claim depreciation for the home that you live in. Depreciation lets you lower your taxable income by the amount you depreciate your home. This amount is figured by taking the value which your building is worth (Sales Price - Land Value) and dividing it by 27.5 (the useful life of a home). This gives you the amount you are allowed to deduct from your taxes.
This is pretty straightforward. The cost of repairs to your rental property is allowed to be deducted from your taxable income. ARMI highlights this amount in all year-end income statements.
You are allowed to deduct the cost incurred by traveling to and from your rental property. For 2009, the standard mileage rate for each mile of business use is 55 cents per mile. Your rental property is a business.
4. Management Expense:
Yep. We are deductible too. Plain and simple. Also, any other professional services firm you hire in association with your rental property is deductible too (i.e. accountants, lawyers, etc.)
Hopefully this one won't come up (especially if managed by ARMI), however, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. However, you cannot deduct any loss of rental income for the period the property is vacant.
We hope this helps you in your tax preparations.... For more information visit http://www.irs.gov/publications/p527/index.html. Publication 527 deals with Rental Properties.