Landlords don’t forget these tax deductions

Despite the lingering bad taste in our mouths from the subprime mortgage crisis, investing in a rental property can still be a smart move. Few investments can give you ongoing income from month-to-month like real estate.Real estate property has the potential to appreciate in value while still giving monthly income. Yes, one of the drawbacks of rental property is the tax owners must pay. Fortunately, there are a number of exemptions and write-offs that are possible for rental property owners.

As tax season begins, here are seven deductions rental property owners can look forward to:

1) Travel Expenses

Keep tabs on any time you travel to the property to make improvements or collect rent, as that can be deducted. On your taxes, you can either take a standard mileage rate (55 cents per mile in 2012) outlined here, or deduct actual expenses including gas, upkeep and repairs.

2) Mortgage Expenses

Similar to homeowner mortgages, rental property owners can write off the interest paid on their mortgage. The mortgage company will send you a Form 1098 that tells how much interest you paid the previous year.

Unfortunately, one-time expenses at closing — such as commission and appraisal — aren’t fully deductible in the year that you pay them. Instead, you can amortize them over the life of the loan, still leaving you with a hefty deduction.

3) Lawn Care or Association Fees

If you own a home and have a lawn service cut the grass or manicure gardens, those expenses can be written off as well. Association fees that condo associations often use to cover lawn care, exterior maintenance and the upkeep and maintenance of other common areas are also deductible.

4) Repairs

Property owners know the drill — when something breaks, you have to fix it. From furnaces to dishwashers, the landlord foots the bill. The good news is that repair and maintenance costs are tax deductible.

The distinction is a repair that keeps your property in good working order. If something breaks or could potentially break and you spend the money to replace or update it, the cost is considered tax deductible.

However, it does mean that you write off strictly cosmetic updates, like adding granite countertops to a kitchen, unless the previous counters were faulty. For cosmetic improvements, you have to depreciate the expense over the life expectancy of the property.

5) Taxes and Preparation Fees

The funny thing about taxes in investment properties is that you are allowed to deduct them. If you have someone else prepare your taxes, like attorneys or accountants, those expenses can also be written off.

6) Insurance and Losses

The cost of insuring the property can be written off along with any losses from casualties, like burglaries or natural disasters such as tornados, hurricanes or floods.

7) Depreciation

The IRS allows rental property owners to deduct depreciation of the value of a rental property. The assumption is that since property is useful for a long time, over that time, it wears out and is worth less money. Thus, you shouldn’t be taxed on the same value as when the property was purchased.

You calculate depreciation by adding up the total costs of the property and dividing it by the useful life of the property Anchor. For residential rental real estate, the useful life expectancy is 27.5 years. So, you would take the total value and divide it by the useful life to discover the depreciation.

For example, if you purchased a rental property for $150,000, you would divide that number by 27.5 for a depreciation of $5,455 per year.

A Word of Warning

As with all tax-related details, it is vital to keep excellent records to back up all your newfound tax deductions. If you are audited, the last thing you want to do is get penalized and pay more tax than you really should just because you don’t have the proper documentation. For further peace of mind, consult a tax professional to help you get the most tax deductions you deserve and organize your documentation.

The Investing Answer: Rental property can be a great investment and the tax deductions you can receive can make it even more appealing. Do a little research and hire a professional to ensure that you get the most deductions possible on your rental property.

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2011-2012 Cost vs. Value: Which Remodeling Projects Pay Off the Most?

2011-2012 Cost vs. Value: Which Remodeling Projects Pay Off the Most?  Are you looking to do some remodeling in your home?  This is a great article to help you determine on what remodeling projects tend to pay off for long term value.

If your home is dated, replacing light fixtures can be an easy low cost project.  Kitchens and master baths are the first place to start for major overhauls.  Click on the link below to read the full article.

2011-2012 Cost vs. Value: Which Remodeling Projects Pay Off the Most?.

Costs of Fannie and Freddie loans going up in April

Bloomberg gazes into the crystal ball to opine on the impact of the rise in guarantee fees at you-know-where. Fannie Mae, Freddie Mac and the Federal Housing Administration will soon charge more to guarantee home-loan debt, starting with an increase of 0.1 percentage point at Fannie Mae and Freddie Mac in April. Costs will rise as much as 0.45 percentage point over the next two years, according to Nomura Securities. “The greater fees suggest that Congress and President Barack Obama’s administration are willing to bet the housing recovery is far enough along to withstand the rise,” the article states.

Turn Your Backyard Into an Outdoor Resort

This summer many people will spend vacation time at home instead of traveling. According to the American Lighting Association (ALA), with a few updates to your outside lighting, you can enjoy a mini vacation at home. Believe it or not, it’s easier and less expensive than you might think to transform your existing patio, deck or pool area into a lovely retreat. Rather than buying a costly designer patio set or lounge chairs that will lose their luster by next season, invest in a new lighting scheme that will enhance your existing outdoor furniture and amenities.

“Creating a beautiful landscape doesn’t have to be expensive,” says Rick Wiedemer of Hinkley Lighting. “A few well-placed, low-voltage path or accent lights can make a huge impact on a well-manicured landscape.” No lawn is too small. “Even modest homes or those with limited yards or gardens can benefit,” he says.

All that is needed are some basic tools, a transformer (which reduces standard 120-volt household current to the safe 12-volt level), outdoor low-voltage copper cable, and low-voltage lighting fixtures – all of which you can find at your local ALA-member lighting showroom.

“The best thing about using low-voltage lighting outdoors is you don’t have to do everything at once. I recommend purchasing a transformer that is larger than you immediately need,” says Lew Waltz of Philips Hadco. That way when you are ready to install additional lighting, the larger transformer will already be in place and ready to handle the task. “You only pay for the energy consumed by the fixtures,” says Waltz. “In other words, a 600-watt transformer that only has 200 watts of fixtures on it, uses 200 watts of energy, not 600.”

When laying out your project, remember a little light goes a long way outdoors. Consulting with a lighting professional at your local ALA-member lighting showroom can help you avoid making the common mistake of too many fixtures in one area. To find more information about lighting all areas of your home, go to

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8 Easy Steps to Winterized Your Home

Now is the time to do those annual tasks before the hard winter sets in. Here is a list of tasks to get ready!

  1. Check smoke detectors:
  2. Install a carbon monoxide detector:
  3. Service your heating system and replace the filters.
  4. Drain sprinkler systems:
  5. Shut off outdoor faucets.
  6. Change light timers
  7. Get firewood delivered.
  8. If you are selling a home and it’s vacant, make sure you turn on the heat and set the thermostat.

What other things do you do to get your home ready for winter? Let us know below!

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