One of the perks of being a real estate rental property investor is the multiple tax breaks and reductions that are offered when you own a property. Whether you are a single investor or part of an incorporated group, you should know what is and what is not deductible to keep you from making mistakes by paying taxes that are not applicable to your filing status. Buying out of state rental properties includes several tax advantages to help you increase your portfolio wealth.
Compared to stocks and bonds, real estate rental properties are a hidden gem that many savvy investors are realizing and taking advantage of buying opportunities. As with any investment, it is best to consult with a qualified tax professional or CPA when you have specific questions about what you can and cannot deduct when reporting your taxable income and expenses during quarterly or annual tax filings.
Travel Tax Deductions for Investment Property Owners
• Local Trips to a Rental Property
If you live in the area where your property is located, you will likely take the standard deduction for mileage expenses offered to any person that conducts business or moving purposes that require motor vehicle travel.
The current IRS rate is 51 cents per each mile traveled for a business expense and 19 cents for moving purposes. These deductions can be made regardless if you use your vehicle, taxicab or third party motor vehicle.
• Overnight Trips to a Rental Property
The IRS closely monitors overnight travel deductions and it is important to keep receipts for every expense that you incur. You can deduct hotel costs, airfare, bus tickets, train tickets, gasoline, food or other qualifying expenses during your travel. Documenting your entire travel route and getting copies of every document related to your travel expenses is essential for tax filing purposes.
Additional Tax Deductions for Investment Property Owners
• Home Office Expenses
If you meet IRS qualifications, you can deduct a certain percentage of any business conducted inside of your home that is related to your real estate investment business. This includes deductions for electricity, Internet access, telephone expenses and some utilities.
• Legal and Service Fees
Any work that you do that requires a legal professional can be deducted as an expense. Other professional advice or work that you pay for may be deductible. This includes services from accountants, investment consultants, tax return preparation agents and property management firms if these are used in relation to your investment properties.
• Employee and Contractor Expenses
The amounts that you pay when you hire employees or contractors to perform work on your property can be used as a deductible expense. These investment property expenses can help reduce your taxable income by reporting the wages you have paid.