Real estate investment offers
many benefits. Perhaps the most enticing is the tax deductions that are
available to property owners. Real estate investment is seen as a business, so
you get a few more breaks than if you're just a residential home owner. This
allows the protection of all your investment income from being overly taxed.
The following lists some tax deductions that are available to real estate
investors.
Mortgage loan interest can be
deducted on your tax return, just like it can for a regular home mortgage. This
is very convenient, as it allows you to offset some of your income from that
property!
Everyone has to pay the dreaded
property taxes, whether you own residential property, commercial property, or
empty land. Luckily, these taxes are tax deductible for investment property
owners. Obviously, the higher your property tax bill, the greater the tax
savings.
If you're a home owner, you can't
deduct your home owner's insurance premiums. However, if you're an investment
property owner, you can! The premiums you pay to cover your real estate
Investment Properties are deductible on your tax return.
I've said before that you often
have to do a lot of repairs and renovations on bank owned properties. The
repair costs, as well as regular maintenance expenses, are also tax deductible
on your tax return. Examples of these kind of expenses include repairing a
damaged ceiling or repainting the walls. Maintenance costs can add up fast,
especially on older properties, so being able to deduct those expenses is a
very important benefit of owning investment real estate. Keep in mind that
property improvements are treated differently than repairs or maintenance.
These are counted against any gain when you sell the property.
In accounting, depreciation
represents a gradual decline in value of an asset over time. You can depreciate
your real estate investment property on your taxes, therefore reducing your
taxable income. Realistically, we all know that homes actually appreciate (rise
in value) in an optimal market; however, the IRS requires depreciation to be
recorded over a set period of time. This depreciation is strictly on paper; it
doesn't affect the property's market value. Current regulations require
residential properties to be depreciated equally over a time period of
twenty-seven and a half years, while commercial investment property must be
depreciated over thirty-nine years.
Have any other questions about
the benefits of buying investment property? View our foreclosure listings to
see our current selection of Florida foreclosures.
