Real Estate Investing Tax Strategies
We want to help you understand the best tax deductions in the Indianapolis area for real estate investors. Many people don’t know how to save money when it comes to tax time. There are probably a lot of deductions out there that you don’t make the most of as you should! In our latest post, find out what the recent tax changes mean to you, then give your CPA or tax planner a call to discuss your strategy!
Most investors will say the same thing to you. Investment in real estate has some fabulous tax breaks to help save a tax season coming fortune. Learning about all the deductions available to you is important so you don’t find yourself on the table leaving money. While the rules seem to change every day, below are some tips to help you save some tax money!
General Management Costs
If you are an investor in real estate, a business owner and a landlord, you will be able to deduct a number of things as far as management is concerned. You can deduct things such as your home office space, office supplies, travel expenses, and cell phone. Many people who work from home do not realize how many expenses they have due to their investment in business or rental property. Your high-speed internet, standing computer desk, and the good pens you like to buy are all needed for the management of your property, and as such, may be written off.
Indianapolis investors spend thousands each year enlisting the help of others with tasks related to their investments. If you have hired a lawyer, property management firm, cleaning service, accountant, or other professional services, you are likely to be able to write off these amounts as long as the expenses related to your investment properties have been incurred. Remember that repairs and maintenance are two separate things, so when you hire someone to work on your property, make sure you are classifying their charges accordingly. For example, a cleaning service would be maintenance, a plumber fixing a damaged faucet would qualify as a repair.
Rental Property Equipment
Real estate investors can now deduct equipment used for the property in accordance with the new tax code. What exactly is the equipment? Equipment is a long-term asset that includes things like systems for heating and cooling, roofs, smoke detection, and more. If the item is furniture, machinery, fixtures, a vehicle, or a computer, under this umbrella it is likely to qualify. This falls under the newly expanded category of business equipment and if you replace property equipment will help you save a bundle in taxes.
As the years go by, the wear and tear from the people who live there and natural causes like wind and rain are subject to your property. As such, over time, you will need to make home repairs. The IRS enables you to take 27.5 years of depreciation deductions. Why is it that 27.5? We don’t know about that. But the point here is that you can deduct the amounts you spend on major improvements like a new roof or finishing a basement for the next 27.5 years. You will need to take the cost of the improvement and divide it by 27.5 in order to properly deduct your depreciation expenses over time. It will be possible to deduct that amount over time. The sad reality is that things depreciate. The least you can do is avoid some of the losses by capitalizing on your depreciation deduction.
Your Mortgage Interest
As an Indianapolis real estate buyer and seller, you’re likely to find many instances where you’re borrowing money. Interest also comes with a loan, but the good news is that these amounts can be deducted. This year you can deduct your mortgage interest, points and insurance costs from your taxes. The only limitation is $ 750k or more loans. This amount had previously been capped at a million. You may actually add up interest costs, so make sure you get an accurate picture of how much you pay for interest expenses every year.
You will want to consult a professional CPA for their guidance and advice when filing your taxes as a property owner in Indianapolis. A talented CPA will help you to leverage every available tax break and deduction. They will give you the guidance and knowledge you need when it comes to big purchases and the effects on your taxes of these purchases. In addition to the above, there are many other things that will affect your taxes this year. The 20 percent pass-through deduction is a huge recent change that allows you to pass through tax-free 20 percent of your income. There are some qualifications to be met, of course, but this and many other recent tax law changes can have a major impact on your real estate profits!