At Pitt Home Buyers, we want to help you understand the best tax deductions for real estate investors in the Greenville area. Many investors know tax deductions are available but fail to realize how they can save them money at tax time. There are quite a few tax deductions out there, and, likely, you aren’t capitalizing on them as you should! Find out what the recent tax changes mean for you in our latest post, then give your CPA or tax planner a call to discuss your best tax deductions for real estate professionals!
Investment professionals will tell you exactly that. Real estate investment is a vessel that has some fantastic tax breaks to help you save a fortune come tax time. It’s essential to learn about all of the deductions available to you, so you don’t find yourself leaving money on the table. While the rules seem to change every day, below we offer some of the best tax deductions for real estate professionals!
General Management Costs
If you are a real estate investor, business owner, and landlord, there are several things you will be able to deduct as far as management goes. You will be able to deduct things like your home office space, office supplies, travel expenses, and your cell phone. Many people who work from home don’t realize how many costs they have because of their business or rental property investments. Your high-speed internet, standing computer desk, and the good pens you like to buy are all needed to manage your property, and as such, may be written off.
Greenville investors spend thousands each year enlisting the help of others with tasks related to their investments. Suppose you have hired a lawyer, property management firm, cleaning service, accountant, or other professional services. In that case, you’ll likely be able to write these amounts off as long as your expenses were to benefit your investment properties directly. Keep in mind that repairs and maintenance are always two separate things, so when hiring someone to work on your property, make sure you classify their charges accordingly. For example, a cleaning service would be property 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, according to the new tax code. What is equipment exactly? Equipment is a long-term asset that includes things like heating and cooling systems, roofs, smoke detection systems, and more. If the item is furniture, machinery, fixtures, vehicles, or computers, it will likely qualify under this umbrella. This deduction falls under the recently expanded business equipment category and will help you save a bundle in taxes if you replace property equipment.
Over the years, your property will be subject to wear and tear from people who live there and natural causes such as wind and rain. This fact means that you will have to make repairs to the property over time. The IRS allows you to take depreciation deductions for 27.5 years. Why 27.5? We don’t know for sure. But the point here is that for the next 27.5 years, you will be able to deduct the amounts you spend on significant improvements such as a new roof or finishing a basement. To properly deduct your depreciation expenses over time, you’ll need to take the improvement cost and divide it by 27.5. That amount will be able to be deducted over time. According to the government, homes should be decrepit by 27.5 years of age. Luckily, this is not usually the case, and you can do things to avoid some of these “losses” by capitalizing on your depreciation deduction.
Your Mortgage Interest
As a buyer and seller of Greenville real estate, there will be many times where you find yourself borrowing money. With a loan also comes interest, but the good news is that you can deduct these amounts. Your mortgage interest, points, and insurance costs can all be deducted from your taxes this year. The only limitation is on loans of $750k or more. Previously, the IRS had capped this amount at one million. Your interest costs can add up, so make sure you have an accurate picture of how much you are paying in interest expenses each year.
When filing your taxes as a real estate owner in Greenville, you’ll want to consult a professional CPA for their guidance and advice. A talented CPA will help you leverage every tax break and deduction available to you. They will provide you with the guidance and knowledge you need when it comes to big purchases and the effects of these purchases on your taxes. There are many other things that will affect your taxes this year in addition to what’s mentioned above. The 20% pass-through deduction is a huge recent change that allows 20% of your income to pass through tax-free. Of course, there are some qualifications to be met, but this and many other recent changes to the tax laws can greatly affect your real estate profits!