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Top Ten Income Tax Benefits For Real Estate Investors

Top Ten Income Tax Benefits For Real Estate Investors

2 min read
Kevin Perk

Kevin Perk is a full-time buy and hold and fix and flip real estate investor with over 15 years of experience. He and...

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It is tax day, April 15th.  A good time to remind people that it is not about what you make, it is about what you get to keep.

One of the best things about being a real estate investor is the many federal income tax advantages that are available.  Real estate investing lets you keep more of what you make.  Here are my top ten ways real estate can help you keep more.

Income Tax Benefits For Real Estate Investors

  • Depreciation – This tax deduction lets you depreciate your real estate buildings.   Every year for 27.5 years you get a deduction just for owning real estate.
  • More Depreciation – Not only can you depreciate the buildings, you can also depreciate the parts that make them habitable.  Things like HVAC equipment, hot water heaters, plumbing and light fixtures.  These fixtures also depreciate at a faster (and thus higher) rate.  Leading to even more and higher deductions from your income.
  • Taxes/Insurance/Utilities – You can deduct all of those real estate tax, insurance and utility charges you have already paid.
  • Repairs – Repairs and supplies needed for repairs and upkeep are deductible.
  • Commissions – Commissions paid to management companies or professional fees to accountants to do your taxes are also deductible.
  • Home Office – If you work from your home, you can take the home office deduction.  This means you can deduct that portion of your home’s expense, such as mortgage payments, tax and insurance, utility payments, etc., related to your home office.
  • Office Deductions – Office supplies and equipment are deductible.   Use your cell phone for business? It may be deductible as may your computer, printer, paper for the printer, envelopes, stamps.  You get the picture.  If it is related to your real estate business, it may be deductible.
  • Business Expenses – Subscriptions, dues and fees are deductible.  You use the internet to search for real estate listings and information right?  You read the local paper to keep up with local real estate events and sales right?  All are deductible.  Are you a realtor?  Do you belong to professional organizations like a local REIA group?  Do you go to seminars to learn new real estate techniques?  All are likely deductible.
  • Mileage – Mileage in your personal vehicle is deductible.  Just keep a log of the miles driven related to your real estate activities and the savings can really add up.
  • Qualified Real Estate Professional – If you are a qualified real estate professional, there really is no limit to the deductions.  Go full time to take full advantage of this.

Related: 10 Last Minute Tax Deductions For Real Estate Investors

Here is the best part: all of the above are before you take your exemptions and standard deduction from your gross income.

So before you sign your 1040 form this tax day, use these deductions to make the tax bite a bit more bearable.  Be sure to check with your tax advisor to keep things on the up and up.  Let me know if I missed anything with your comments.

Photo: Dave Dugdale