Are Rental Property Investments Worthwhile? Tax Deductions

There’s no such thing easy “mailbox money” because there’s always some type of risk and work involved to achieve it, despite what a lot of real estate gurus will tout on their infomercials.  Rental property investments are no different, because like life, it’s all about the risk in what measures you’re looking to take to not only protect yourself but also your financial future.

In this article, we’re going to look at some of the basic tax deductions when there’s a single-family rental property involved.

  • Loan interest, especially in the beginning, significantly lowers your profit.
  • Depreciation, like any other fixed asset, is a deduction many people fail to capture on their tax return because if it’s done legitimately, it’s a great tax benefit.
  • Your repairs to the property are deductible, unlike your personal homestead.
  • The Tax Cuts and Jobs Act has allowed some landlords to pass up to 20% of their rental profit.
  • Landlords are not obligated for self-employment tax, which can save 15.3% off the rental profit.
  • Legitimate travel back and forth between your tax base and the rental property in question, whether it’s a percentage of your vehicle costs or the standard mileage deduction, is important to track properly.
  • Insurance for your property not only ensures its security but also a valuable write-off.
  • Legal and professional services related to the business dealings of the property.
  • Property taxes are fully deductible unlike the $10,000 cap for personal homestead properties.
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  • If you have a dedicated credit card that you use solely for the property, then any interest payments are also eligible for a tax deduction.
  • HOA fees and other related expenses such as utilities the landlord pays for regarding the use of the property are eligible.

There are many more options that are available to explore and there’s never a one-size-fits-all plan for people, because it always depends upon the situation, what type of risks and financial investment a person can make, as well as how much work they’re willing to put into the property.  Nothing is ever or everyone would be doing it, so before you jump on the easy train, it’s best to explore all options before you end up losing more than what you can afford.

Dwayne J. Briscoe