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Tips on Rental Ownership Tax Breaks by Saen Higgins
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.
Saen Higgins is the Co-Founder of US Tax Lien Association. He is one of the world’s foremost authorities on the subject of investing in Tax Lien Certificates and Tax Foreclosed Properties. He has been training and speaking internationally for over 25 years. Saen is passionate about sharing his philosophies on real estate investment and creating financial freedom. His extensive knowledge in the field of self-directed retirement accounts has changed the quality of life for thousands and the way they invest. Saen’s devotion to helping people creates true financial independence and is only matched by his business partner, Tony Martinez.