Rental Properties Offer Tax Advantages
Rental Properties Offer Tax Advantages
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Home Page > Finance > Real Estate > Rental Properties Offer Tax Advantages
Rental Properties Offer Tax Advantages
Posted: Jun 14, 2009 |Comments: 0
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Rental Properties Offers Tax Advantages
When one leases a property to gain additional income in the form of rent, one also needs to supplement the rental income by making use of a host of incentives and tax advantages that would accrue for being a landlord There are a number of tax exemptions available on the monthly rent which would be to your advantage and further justify one’s decision to rent a property.
The most significant and quantum saving comes by way of the entire amount of interest and principal payments towards servicing of the loan being deducted from one’s income before arriving at the tax payable. This fact about tax exemption is known to a majority of people. What is not known to most people is that all payments made by way of credit card to purchase and goods or services linked to the rented property are also tax deductible. Most prudent financial planners would suggest balancing the inflow and outflowing between rental income and loan servicing respectively.
The fundamental principle of accounts while allowing tax deductions to rental income is that all expenses used to generate business expenses are tax deductible. Hence all the expenses which one would incur to maintain, upkeep and insure the rented property would be available for deductions. Some of these expenses available for deductions are discussed as under:
All the expenses which are incurred for the maintenance of the rented property shall be allowed as tax deductible. These maintenance expenses could be related to security, housekeeping, insurance or even landscaping. Depreciation benefits are available for the rented property the second year onwards. Depreciation allows the owner of the property to put an easy way to recover property cost. The owner has to undertake travel associated to maintenance, repairs or giving an ear to the complaints of the tenants. All the expenses incurred towards such travel is allowable for tax deductions. The amount incurred towards insurance of the rented property is available as deductions. Just pay the premium and claim the same as a deduction. Payment of professional fee to various professionals including accountants, solicitors, etc are available as deductions. The expenses incurred on the repairs carried out for the general maintenance and upkeep of the rented property are deductible from the rental income for that year to arrive at the taxable income.
In order to avail these tax incentives and exemptions, the landlord has to ensure necessary bookkeeping is in place and is supported by original invoices. These could come in extremely handy in case of notices or any inquiries from the tax department during the later years.
The rationale behind providing these tax advantages and exemptions is to promote the growth and development of the housing sector. A flourishing housing industry has a catalytic effect on all other sectors namely steel, electrical equipment, cement, fire equipment etc. The awareness of the tax advantages associated to a rental property can supplement one’s income and go a long way in enjoying the finer moments of one’s life.
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For some high-end rentals, consider DC Ranch Scottsdale Homes, Gilbert homes for sale or Glendale homes with pools.
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For some high-end rentals, consider DC Ranch Scottsdale Homes, Gilbert homes for sale or Glendale homes with pools.
