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Tax advantages of a Rental Property

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By : Fredrica Smith    99 or more times read
A rental property is a very lucrative business as you retain the ownership of the property and at the same time earn an income from it. Not only this, rental properties enjoy a lot of tax advantages. For example, expenses incurred on the property such as repairs are deductible.
Other tax benefits available to the owner of the rental property are:

  • Mortgage Interest: the interest you pay on your rental property mortgage is deductible from your taxable income.

  • Depreciation: The government states that you can take the value of a building, divide it by 27.5 years and deduct that amount from your taxable income every year.

  • Repairs: Expenses incurred on repairs are deductible from the taxable income. These repairs include painting, help acquired to keep the property in good condition etc.

  • Travel expense: mileage driving to and from the property and depreciation can also be included because renting is treated just like a business.

  • Home Office: If some part of your home is used as an office for rental management, then expenses incurred in its up keeping can be deducted from your tax.

  • Salaries paid to employees and contractor fees: If you employ a rental property manager, the fees paid can be included in tax deductions.

  • Insurance: All premiums paid on any insurance taken for the house can be treated as a tax deductible.

  • Legal and professional fees: Fees paid to attorneys, real estate investment advisors, accountants and managers are all part of deductible income.

The biggest advantage of a rental property is that you do not have to make a large initial investment. After paying a small down payment, you can pay your mortgage money with the rent money you receive every month. But there are a few things which you should keep in mind before you plan to buy a property for rental purposes.

  • Make sure to have enough funds to pay the mortgage when your property is vacant.
  • Your funds must also be able to cover maintenance and improvement costs.
  • Make sure that you provide a fair deal to the tenants while making a profit for yourself.
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