There are around 11 million real estate investors in the United States, though many of them didn't consciously choose this. Due to the recent real estate market conditions, many investors became so accidentally. People who were buying homes and flipping them for a profit are no longer able to sell them. However, they can rent them out to avoid foreclosure. These types of investors are more likely to lose out on tax deductions if they are unaware of how to manage their investment properly.
There are many tax benefits and write-offs for real estate investors to take advantage of. However, to take advantage of these benefits, you have to keep careful track of your income and expenses.
There are five areas you should pay close attention to to make sure you are not losing money on your real estate investment.
1. Depreciation deductions. Set up a depreciation expense so you can write-off all the value over 27.5 years. The IRS allows real estate investors to use an accelerated depreciation method. Only 13% of investors actually take advantage of this method. Ask your accountant for more information.
2. Track your travel to the property. All your travel to and from the property can be written-off, so keep up with all your millage.
3. Tax preparation. The Schedule E form, which you have to fill out for rental property, can be written off.
4. Document repairs. As long as the repair was done in the same year, it can be written off.
5. Property damage. If there was damage to the property from rain or a storm, then you can file a casualty expense for a write-off.
These tax deductions will help you get the most from you taxes this year and each year you own your real estate investment. Good luck with it.
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