10 Last Minute Tax Deductions For Real Estate Investors

by | BiggerPockets.com

If you’re anything like me then you’re probably scrambling to get all of your paperwork together last minute so you can file your tax return on time.  Owners of real estate, like owners of any other for profit business, are able to reap major tax benefits if they know what they are doing at tax season.  Since tax laws change frequently the best practice is to hire a seasoned accountant familiar with real estate to assist with your yearly return.   Here are some last minute tax deductions for real estate investors that you can mention to your accountant so you don’t miss out on them this year.

  1. Interest –interest paid to a lender for loans to purchase or improve real estate is deductible as well as interest paid to a credit card company for anything related to landlord activities.
  2. Repairs – any ordinary, necessary and reasonable money spent repairing rental properties is deductible.
  3. Depreciation – the cost of the property purchased is not deductible the first year but rather in small portions over 20-30 years.
  4. Property Management Company – landlords can deduct fees paid to property management companies for leasing related activities under the professional services deduction allowed by the IRS.
  5. Travel – landlords can deduct expenses for local travel that pertains to their landlording business.   This includes deductions for vehicle expenses.  If your real estate business requires you to travel longer distances than expenses like plane tickets, food, and lodging become legitimate deductions.
  6. Home Office – real estate investors can deduct home office expenses in the home they own or rent from their income.
  7. Attorneys/Accountants – any fees paid to attorneys and accountants are tax deductible.
  8. Employeeslandlords are permitted to deduct salaries for employees and independent contractors that are part of their rental business.
  9. Damage – depending on whether or not the property was insured, landlords can deduct a portion of the loss they sustain when their properties are damaged or destroyed.
  10. Insurance – nearly every type of insurance related to real estate investing is tax deductible.

Taking advantage of these 10 last minute tax deductions for real estate investors is sure to save you tons of money on your 2012 tax return!

Photo: kenteegardin

About Author

Frank L. DeFazio sells Philadelphia Real Estate and Philadelphia Condos for Prudential Fox & Roach in Center City Philadelphia. Frank is a real estate agent, investor, developer, and founder of the CenterCityTeam. Read more from Frank at his Philadelphia Real Estate Blog

1 Comment

  1. From 2008 through 2010, real estate investing lost some of its luster because of the global financial crisis (and the securitization market – which made bank’s unable to offload risk onto investors). However, the tax benefits have stood the test of time – the biggest of all of them is the depreciation tax deduction. Investment property can be depreciated down to zero, show no positive return on the tax books for years, yet have magnificent cash returns to the owner. That same building, with proper maintenance also keeps its value. Now, particularly in the New York area, real estate has come back strong, with rents and values continuing to climb.

    Jonathan Winter

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