Apr 202011

Image by the justified sinner via Flickr

For all landlords who are contemplating renting their property to prospective tenants, there can be specific tax incentives involved. Many potential landlords think that the only benefit to renting is the rent itself, but that’s a misnomer. Substantial tax write-offs can be an even better reason for investing in rental property. Items that can legitimately be claimed on a landlord’s tax return are:

[1.] Property improvements

Although normally a landlord cannot deduct property improvements all in a single year, it is possible to take depreciation and recover those improvement costs over a period of 27.5 of those property rental years. In addition, though, some of those home improvement costs could be technically earmarked as simply rental property repairs, and they may be written off during the year that the improvements or repairs are performed.

[2.] Credit Card interest

If a credit card is utilized to pay for repairs or services provided for any tenant, the interest charged is a deductible item.

[3.] Landlord’s home office

A landlord can deduct any expenses related to a home office, based upon a percentage of the home used as a home office.

[4.] Expenses for local business travel

Local business travel includes driving to a rental property for repairs, improvements or simply responding to a tenant complaint, as well as travel to and from stores for the purpose of purchasing supplies. The auto or truck used for these activities can be written off via one of the following means –

A. Real costs such as automobile repairs and fuel.
B. The flat allowable cost per each deductible mile of 58.5¢. This rate should not be used, however, if business expenditure depreciation was previously claimed for that tax year.

[5.] Theft or Casualty Loss

If rental property has been destroyed or damaged, the total loss minus any insurance coverage may be claimed as a deduction.

[6.] Travelling long distances

With appropriate record-keeping, this includes hotel, meals, airfare for business related to being a landlord.

[7.] Do not rent to friends or family

A landlord could lose all possible tax deductions by renting to friends or family members.

Mr. Washa had only $15 to his name when he came to America in the late 1960’s, he is now an accomplished building superintendent in the city of Los Angeles.

 Posted by at 8:38 am
Apr 012011
Property market

Image by alancleaver_2000 via Flickr

Local governments oversee the operation and maintenance of important public services and facilities. Funding for these facilities come, in a large part, from property taxes. Without these critical funds, many services, such as recreational areas, roads, libraries, waste disposal and treatment, and fire departments, would be unavailable to the public.

Annually, the governing boards of these local facilities and services will analyze and decide upon a budget for their needs. After budget approval, a tax rate is figured by dividing the current tax pool by an assessed value of the given jurisdiction. Some states and municipalities use a flat-rate method known as millage tax or millage rate. Under this system, taxes are assessed as $1 for every $1000 of the property’s assessed value.

A property’s assessed value is based on current market value of the property. Other factors, such as condition, location, recent area growth, and recent sales prices of nearby property are taken into consideration as well. If a property owner feels their assessed value is too high, they can request a series of Residential Property Tax Appeals through local administrative offices or the local assessor’s office (Click here to learn more). In addition to this, each state sets an assessment rate used to calculate taxes due.

With the assessed value, assessment rate, and tax rate, it is simple to figure out the taxes due for a property. As an example, we will assume a property value of $145,000, with an assessment rate of 9% and a property tax rate of 23%. The first step is to multiply the assessed value of $145,000 by the assessment rate of 9%, resulting in a total of $13,050. Next, multiply this total by the current property tax rate, in this case 23%, resulting in a final total due of approximately $3001.

Property taxes are due annually, typically around September or October. Failure to pay any taxes due may result in fines and penalties, according to local and state laws. In the event that taxes remain delinquent for an extended period, most local municipalities have laws and processes in place for the seizure and sale of property to reclaim debts owed by individuals. However, using services and tax credits available in their area, most property owners can prevent these events from occurring. Currently, approximately 75 percent of states offer credits and exemptions to households that meet various criteria.

Adele Rigo enjoys time with her family and friends, she works for a property tax protest firm in Houston, she loves crafting and hiking. Contact him at his website for more information.