| These days, everyone is full of reasons why you | | | | deductible, so don't let your accountant miss |
| shouldn't invest in real estate, from the market | | | | them! |
| crash of 2007-2008 to the high foreclosure rate | | | | Tax Tip 4: Repairs and Updates |
| to high unemployment rates to the unsure | | | | In the case of investment properties, the money |
| economy. Be all that as it may, there are plenty | | | | you spend on repairs to put the property in |
| of good reasons to buy a home or invest in real | | | | habitable condition is tax deductible, and serves |
| estate, from long term appreciation trends to | | | | both as an investment in your property and to |
| monthly rental income to tax deductions. And with | | | | reduce your taxes. The laws get complicated |
| taxes on the rise, anything you can deduct is | | | | here though, so be sure to consult your |
| certainly good news. | | | | accountant on this issue. |
| Here are some of the ways you can save | | | | Tax Tip 5: Property Management Fees |
| money on taxes by investing in real estate, and | | | | Do you have a property management company |
| keep the Tax Man at bay! | | | | manage your rental units? Their fees are tax |
| Tax Tip 1: Settlement Costs | | | | deductible as well, so write them off! |
| One unfortunate reality of real estate is that it | | | | Tax Tip 6: Depreciation |
| costs a lot of money up front, in the form of | | | | Regardless of what the market says about your |
| settlement costs. These costs range from | | | | rental property's value, Uncle Sam is willing to |
| mortgage fees (such as origination points and junk | | | | view it as a depreciating asset, and you can |
| fees), to title fees (such as title review and | | | | deduct the depreciation! This gets complicated, so |
| settlement attorney fees), to appraisals, to | | | | consult your accountant, but the gist of it is that |
| recording fees and home owner insurance. | | | | the government sees the depreciation as a 27.5 |
| Fortunately, most of these fees are tax | | | | year-long decay in the value of your rental |
| deductible, so when you calculate your taxable | | | | property. |
| income, be sure to bring your HUD-1 settlement | | | | Tax Tip 7: Accounting Costs |
| statement to your accountant's office. | | | | You know that expensive accountant you've had |
| Tax Tip 2: Mortage Interest | | | | to hire to figure all these tax issues out for you? |
| The interest you pay every month to your | | | | Well, at least you can write off their bill as a tax |
| mortgage lender (which constitutes, incidentally, | | | | deductible expense! |
| the majority of your mortgage payment) is | | | | Tax law is extremely complicated, and even |
| 100% tax deductible. Subtract it all from your | | | | more so when it comes to real estate |
| taxable income! | | | | investment, so be sure to hire a good account to |
| Tax Tip 3: Real Estate Taxes and Private | | | | prepare your return. The investment, both in the |
| Mortgage Insurance | | | | real estate and the accountant, will help pay for |
| In most cases, your mortgage payment includes | | | | itself with these excellent tax advantages, so |
| taxes, and if you have high LTV (loan to value | | | | take advantage of them, and don't give up on |
| ratio) loan, it probably includes mandatory private | | | | real estate just yet! |
| mortgage insurance (PMI). These costs are tax | | | | |