MY Home Leasing – In the News – Rental Investment Benefits

Reminders on the Benefits of Rental Investments

At My Home Leasing, we manage properties for a variety of landlords.  Some intentionally decide to become real estate investors.  Others stumble into becoming a landlord through keeping their starter home, a quick job change out of state, or change in market conditions.  No matter the motivation, there are serious benefits to owning rental properties. Current tax laws allow for home owners to take the full advantage of $250,000 of tax-free profit for an individual ($500,000 for a couple) if the residence has been the primary residence for 2 of the past 5 years.  This gives homeowners the opportunity to rent their house for 3 years while having tenants pay down their mortgage, property values rise, equity increases, and they can take advantage of many tax benefits over the years. The surprising truth is that rental properties provide more tax benefits than nearly any other type of investment.

There are a number of tax advantages landlords should take note of, though an accountant will likely assist with identifying most of them.  Interest usually falls under the single most considerable deductible expense. This would include mortgage interest payments on loans taken to acquire or improve rental property and any credit card interest connected to your rental activity. There is currently a limit on interest deductions for landlords who earn more than $25 million from their rentals.  The depreciation of a rental property is another considerable deduction.  The cost of your rental property—be it a house or apartment building—is not fully deductible for the year in which you pay for it. Landlords, instead, get back the property’s cost through depreciation, which involves deducting a portion of the property’s worth spread out over several years.

No landlord enjoys hearing that repairs that are necessary.  The good news is repairs can be deductible if claimed within the same year.  This could include repainting, plastering, taking care of leaks, replacing broken windows, and fixing floors and gutters. year the repairs were made—are fully deductible.  My Home Leasing tracks repairs and costs for our clients and provides year end accounting to make this deduction an easy one.

Operating expenses are also deductible.  Management fees and leasing fees charged by your property manager are also fully deductible.  Fees you’ve paid to contractors, accountants, attorneys, real estate investment advisors, and other similar professionals can all be deducted.  Insurance premiums you pay are likely deductible. Landlords can take advantage of include flood, fire, theft, and landlord liability insurance.

Deductions for home office and travel are sometimes overlooked by landlords. Landlords are entitled to a tax deduction for nearly all driving connected with their rental activity. This includes visits to the property to handle an issue or visits to the hardware store to address maintenance. Travel to the property to perform general improvements are part of the property’s tax basis and depreciated over the years.  Landlords can deduct vehicle-related expenses such as gas, repairs, and maintenance, or they can use the IRS’s most current standard mileage rate. For out of town landlords, tax deductions can include long-distance travel expenses such as airfare, hotels, and meals.

As with any business, keeping accurate records is imperative and surrounding yourself with qualified professionals, such a property manager, Realtor, and accountant can keep you on top of your game and get you the most advantages for your rental. My Home Leasing has been assisting clients with their real estate investing for over 20 years and we are proud to serve the Charlotte area in this booming market!

Written by MY Home Leasing Realtor + Property Manager – Laura Grant