5 Tax Tips to Bring Home More Money From Your Rental Properties

By: Tracy Phelan

5 Tax Tips to Bring Home More Money From Your Rental Properties

Tags: Rental Properties

5 Tax Tips to Bring Home More Money from Your Rental Properties

5 Tips to Help You Get More Money from Your Investment Properties at Tax Time

Tax time is confusing for many people. If you’re a real estate investor, there are seemingly endless laws governing what you can and can’t do on your taxes. The reality is, taxes are difficult to understand, and a lot of the information online is incomplete or inaccurate. If you’re doing your taxes yourself, you could be missing out on opportunities to put more money in your pocket each year. For this reason, we’ve put together a few tips to help you do your taxes this year. Keep in mind, we’re not tax professionals, but we do recommend consulting one if you have any questions.

1. Your Investing Business is Entitled to Business Deductions

Many investors fail to realize that what they do is actually a business. As such, they are entitled to take certain business deductions on their taxes. Some of the most common deductions are listed below. Mileage – the government allows 57.5 cents for every mile you drive for business-related trips. Home office – you conduct much of your investing business at home, so you’re allowed to deduct part of your house on your taxes. Interest – the interest you pay on your rental properties is tax deductible. Professional services – property managers, attorneys, accountants, etc. are tax deductible if they are exclusive to your real estate business.

2. Hang onto Rental Properties for at Least a Year

The longer you hang onto a piece of property before selling it, the less you’ll likely pay in taxes on the money you make. Anything you buy and sell in less than a year is subject to a short-term capital gains tax, which adds the money you make to your income and you are taxed in whatever bracket you fall into.

3. Take Advantage of the 1031 Exchange

The 1031 Exchange is a tax benefit that allows you to defer taxes on a property you sell if you use the profits to purchase another property. If you’re trying to build your portfolio by buying and selling single-family properties, this is a great way to do so without having to worry about paying taxes along the way.

4. You Don’t Pay Taxes on a Refinance

When you refinance a property, you won’t have to pay taxes on any money you receive. This is because you aren’t actually purchasing anything, and you aren’t making a profit on the deal.

5. Automate Your Records

With the abundance of accounting software available these days, there’s no reason to keep a shoebox full of receipts anymore. Find an accounting software that works for you and use it religiously so you don’t miss any deductions you have coming to you.

Since tax time is confusing for many people, it’s important you learn everything you can about doing your taxes to get the most out of your investment properties. Hopefully, the tips outlined above will help you bring home more money from your rental properties.

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