The Realty Geek's Blog

Tax Strategies for the Investment-Minded Consumer

With tax season approaching, this blog post is a good reminder to keep track of what tax deductions you can take for a rental property. New homeowners should also be aware of the home mortgage interest deduction for their primary residence.

It's hard to believe that tax season is nearly here! If you own a Silver Spring home that is an exclusive rental property, you can deduct numerous expenses including taxes, insurance, mortgage interest, utilities, housekeeping, and repairs. According to HouseLogic, even towels and sheets are deductible! Use Schedule E. You can also write off depreciation, which is the value lost due to the wear and tear a home experiences over time.

Treat the rental property like a business, says Mark Steber, chief tax officer at Jackson Hewitt Tax Services. Keep detailed records and maintain a separate checking account. Figure you’ll spend a couple of hours a week, on average, over the course of the year managing the property.

To maximize deductions, you need to be actively involved in the rental property. That means performing such duties as approving new tenants and coming up with rental terms. You also need to own at least 10% of the property. See IRS Publication 527 for details.

If your adjusted gross income (AGI) is $100,000 or less, you can deduct from your taxable income up to $25,000 in rental losses—that is, the difference between your rental income and your rental expenses. The deduction gradually phases out between an AGI of $100,000 and $150,000. You may be able to carry forward excess losses to future years, or use losses to offset taxable gains when you sell.

Expenses can add up.
HOA fees (average: $420), routine maintenance costs ($360), and six months’ worth of utilities ($1,100) alone total nearly $2,000. By deducting $2,000 from taxable income of $100,000, a married couple filing jointly would cut their tax bill by $488.

The EMA Real Estate Group are your local experts when it comes to investing in real estate. We ensure exceptional service, including both personal consultation (offering vast experience and knowledge on which you can count) and financial advice, particularly about interest and tax benefits for real estate investors.

Emcee Arah - "the REALTOR with Architectural Dimension" – is a Certified Investor Agent Specialist (CIAS). He is uniquely equipped to assist you in navigating today's residential real estate market. Contact us onlineor by phone at (301) 452-5252. Leave your comments below – we'd like to hear from you.

Comment balloon 2 commentsEric Proulx • December 28 2011 12:09AM


AN FYI to our Canadian audience. There are quite a few differences in our tax regulations. Make sure to consult with a reputable Accounting firm. Get some referrals from like minded business people on their experiences with tax issues. Happy New Year

Posted by Chuck Beaumont, Going The Extra Mile... (Royal Lepage Binder Real Estate) almost 7 years ago

Thanks Chuck for the input! Definitely don't want to forget about our Canadian Audience!

Posted by Eric Proulx ( almost 7 years ago