If you lease apartments, you may be eligible for more tax breaks than you realize. Investing in rental properties and becoming a landlord may be one of the best things that you ever do for your financial health, savings account, and future retirement. It can help you save on taxes each year, too. A property owner can claim a number of tax deductions, but it can be tricky to know which ones are right for your situation. Here are some specific items that you can deduct that can benefit your bottom line even more.
Deduct This: The Costs of Your Home Office Space
If you have set up an office in your own home or in one of the rental properties that you own, this will be tax deductible as well. It just needs to be an office that you use for the rental business. Expenses that are related to upkeep on the office are also deductible. Office expenditures can be deductible, including such items as computers that are used for rental business, fax machines, and accounting books. Even the expenses of an internet connection and a business phone can be deducted. If in doubt, consider whether you use the items directly for your rental business for the majority of their use.
Deduct This: Legal Expenses
It's extremely important to hire an experienced lawyer to help you draft a rental agreement and otherwise ensure your best interests are protected as a landlord. The costs of doing so can be deductible. Also, sometimes other deductible legal expenses come up for a landlord when they must evict a tenant or otherwise deal with problems with tenants. Legal expenses from lawsuits a landlord may face over time can also typically be deducted.
Deduct This: Interest That's Paid on Rental Property Loans
If you take out a mortgage or loan on your rental property in order to make the investment, your annual percentage rate (APR) should be deducted from the gross rental income that you take in each year. This is also the case for interest on home improvement loans that you take out to improve the property. While simply paying off the loan on the property may be a better overall financial strategy, this can create significant savings for you if you do need to carry the loan on your property for a long time.
Finally, keep in mind that tax deductions can be a great way to get a little back from Uncle Sam at the end of the tax year, or it can simply prevent you from having to pay more in taxes. Always discuss deductions with your account before taking them for the first time. It's also important to discuss any changes in circumstances with the accountant to ensure that you are still eligible for the same deductions each year.