IRS- Taxes – Finally, All Filed!

And, here is what I have to say: “Everyone should be paying their taxes with a smile! I tried… but the IRS wanted cash!”

Fortunately, there is Real Estate! Owning real estate has always been the most beneficial investment.

Top Ten Tax Deductions for Landlords

Rental real estate provides more tax benefits than almost any other investment. Here are the top ten tax deductions for owners of small residential rental property.
1. Interest; 2. Depreciation; 3. Repairs;  4. Local Travel; 5. Long Distance Travel; 6. Home Office; 7. Employees and Independent Contractors; 8. Casualty and Theft Losses; 9. Insurance; 10. Legal and Professional Services

Owning a Home — What’s Deductible?

Home ownership allows a lot of tax advantages not available to someone who merely pays rent. A homeowner can deduct points used to obtain a mortgage when buying a home, mortgage interest paid during the year, and property taxes. Your biggest deduction – Interest!

Here are some points to consider:
Defining “Home”:  your home can be a house, co-op, condominium, mobile home, trailer, or even a houseboat. For trailers and houseboats, one requirement is that the home must have sleeping, cooking, and toilet facilities. Even a rental can be considered a second home, provided you live in it either fourteen days out of the year or at least ten percent of the number of days you rent it for, whichever is greater.
Interest as a Tax Deduction: At the end of each year, your lender should send you a form 1098. This is your deductible interest, provided you meet certain conditions.

Home Acquisition Debt (an IRS Term): An important IRS term is “home acquisition debt.” Any first or second mortgage used to buy, build, or improve your home is considered to be home acquisition debt:

Home Equity Debt (another IRS Term): The IRS has another term called “home equity debt.” Basically, this is any loan amount in excess of what was spent to purchase, build, or improve your home.  For the interest to be fully deductible, home equity debt cannot exceed $100,000 and the total mortgage debt on the home must not exceed its value. This can create a problem for those using 125% loan-to-value second mortgages to consolidate debt. That portion of the loan amount that exceeds the value of your home is not tax deductible (unless you used it for home improvement).

Deducting Points When Refinancing
: Points paid during refinancing must be deducted over the life of the loan. For a thirty-year loan, you divide the points by thirty and get to deduct that amount each year. Exception:  If you did a “cash out” refinance and used some of the funds to improve your primary residence, a portion of the points are deductible in the year you paid them. If you obtained a $200,000 loan and $50,000 was used for home improvement, then one-fourth of the points are deductible in the year you obtained the loan.

Deducting Property Taxes: Most homeowners pay property taxes to a local, state or foreign government. In most cases, property taxes are deductible.

Impound Accounts: Many mortgages have impound or escrow accounts. When calculating your property tax deduction, don’t deduct what you pay into that account. Only deduct what is paid from the account to the taxing authority.

Limits on Deductions: You may be subject to a limit on some of your itemized deductions.

Certified Public Accountants: Whenever you reach a point where you begin itemizing deductions, it is best to have your tax returns prepared by a Certified Public Accountant. Internal Revenue Service rules and regulations can quickly become…confusing.

As always, if you need a sound real estate advice, remember that “Real Estate Is A Serious Business; Get A Pro!”

Kate Smith, Realtor®, ABR, CRS, E-Pro,TRC, CLHMS, SFR, CDPE
Luxury Residential, Commercial and Distressed Properties Specialist
Cell: 786.412.8510; Fax: 954.923.4554;
kate@hollywood-beach-real-estate.com
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“Some make it happen, some watch it happen, and some say, what happened?”

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