Who doesn’t enjoy a good gripe about paying taxes? Not only is it money that leaves your pocket, but they’re also a pain to figure out. That’s why sometimes you may turn in your taxes without taking advantage write-offs and deductions because you’re not aware they exist!
However, don’t worry! We’re here to help make sure you take advantage of all of those deductions you can use. This way, you’ll pay fewer taxes and pocket the additional cash. Here are five essential write-offs all property owners should know about:
Depending on the type of property you own, you can qualify for different deductions. The first two write-offs are for general homeowners which mean anyone who owns a home of any kind.
1. Mortgage Interest
This deduction is one that you would be able to use if you choose to itemize your deductions rather than use the standard deduction. This makes sense from 2018 on if your deductions are over $12,000 for a single taxpayer and $24,000 if you’re filing jointly as a married couple. Now that the standard deduction is higher, you’ll have to see if it’s still worth your while to itemize your deductions.
So, how does it work? You deduct the amount of your mortgage paid during the year that went towards paying interest. Keep in mind that you can deduct mortgage interest for your primary home as well as a second home (this must be a home, not a rental!). There are some limits, exceptions, and rules around this, but it’s generally an excellent deduction item for most homeowners.
2. Property Taxes
Also an itemized deduction option, property taxes can also be deducted from your taxable income. This ensures you don’t pay tax on income already spent on taxes.
Rental Property Owner
If you’re a landlord, there are plenty of write-offs for you as well! Take advantage of them to reduce your tax burden!
Landlords can also get a break on mortgage interest and can deduct this from their taxable income. However, landlords can also deduct interest on other business-related expenses such as credit cards or loans used for property improvement. That’s great news for landlords!
No one likes to think their rental property is depreciating, but for the IRS, that’s the reality. If you keep after your property, it’s unlikely that it will devalue, but according to the IRS, your building is good for 27.5 years. In a way, they’re right. You do have to make improvements continually. Deducting for depreciation is a way to recognize this. If you want to get fancy, you can do a cost segregation study to deduct specific amortization on furniture at a different rate than depreciation on your building’s actual construction. In any case, you get to claim this depreciation.
Rental properties require services such as marketing. You can write this off as a business expense. Whether you pay for your website or ads in the local paper, these costs are part of doing business and can reduce your tax burden.
With these essential tax write-offs complete, your tax burden will shrink and make you a happy property owner. Don’t pay more than you have to!
Are you an Orange County property owner who doesn’t want to struggle through tax season? A Creative Property Management can take care of your taxes as part of our services. Call to learn more!