#Tax software for rental property owners professional

As an Active Investor, youвЂ™ll enter that deduction on line 17 of your IRS Form 1040, and it will reduce your taxable income by the amount of the depreciation loss. It is a non-cash accounting loss, all the same, and can reduce the IRS taxes you owe. The actual value of the property does not go down over time. When you do that, assuming your net income is zero after deducting other expenses described above you now show a $10,000 loss.

For our example home, then, dividing the value of the structure, $275,000, by 27.5, lets you enter $10,000 per year as a depreciation expense. IRS Publication 527 sets the depreciation period of a typical home at 27.5 years. IRS tax laws allow you to depreciate the value of the structure, but not the land it sits on. The last part of IRS Schedule E lets you deduct depreciation on your home, much as you would for any business asset, like cars, trucks, or computer equipment. So, whereвЂ™s the benefit to the rental property owner? Depreciation Is the Key to Wealth Building through Residential Rental Property If you own more than one property, this may mean that, despite the cash flow from your rentals, you end up producing a very low or zero actual income youвЂ™d have to pay taxes on. If you add up all of the deductible costs connected with your home, as in this sample, you may find that the expenses you can include on Schedule E may equal the rental income.

Travel Expenses вЂ“ If you live far from your rental property, you can deduct the entire cost to visit the property to inspect it.

Other Expenses вЂ“ As a business, you can potentially deduct things like home office expenses, a portion of cell phone and Internet costs associated with the rental property, and more.

Maintenance Costs вЂ“ Repairs, upgrades, and improvements are business expenses for rental properties.

#Tax software for rental property owners professional

Property Management Fees вЂ“ Why manage your own rental property if you can use professional management fees as a business expense?.

HOA Fees вЂ“ For condominium properties, these are a business expense.

Insurance вЂ“ The insurance on your rental property is now an expense.

Property Taxes вЂ“ Here, youвЂ™ll enter $2000 for the sample home.

Mortgage InterestвЂ“ For our sample home, youвЂ™ll enter $10,000.

Expenses вЂ“ All of the expenses you incur for your rental property get listed in Schedule E, and the list is much longer than in Schedule A, and includes:.

If you own multiple rental properties, the total of collected rents will be entered as rental income.

Rental Income вЂ“ For our sample home, youвЂ™ll enter $18,000 as the income from this rental home.

The rows and columns for Schedule E include entries for all of the following: IRS Schedule E Is The Key to Tax Savings for Minnesota LandlordsДЄs explained in IRS Publication 527, Schedule E includes deductions not only for mortgage interest and property taxes, but also a number of other expenses and depreciation you can deduct for being in the residential property rental business. Instead of just entering deductions for mortgage interest and property taxes on Schedule A, youвЂ™ll now be completing Schedule E, which covers gains and losses from residential rental properties. As a rental property owner, youвЂ™re a small business, and IRS tax codes are very favorable for rental properties.

But, when that home is a rental property, youвЂ™ll find a number of other deductions that may surprise you. Your actual numbers will vary, of course, but weвЂ™ll use these numbers for our examples.ДЄs a homeowner living in that home, youвЂ™d be able to deduct the mortgage interest and property taxes as itemized deductions in Schedule A when you file your IRS forms each year. In addition, youвЂ™ll spend about $700-$800 per year in insurance for the home. During the year, you may pay about $10,000 per year in mortgage interest and $2000 in property taxes. That adds up to $18,000 a year of rental income. If it rents for $1,500 per month, it would be typical for this rental market. Valued at $300,000, this typical home represents, roughly, a land value of $25,000 and a value of $275,000 for the structure. To get an idea how this all works, letвЂ™s look at a typical Minnesota metro area rental home.

We encourage our clients to seek professional advice from their own tax advisors, but we can help you to understand how these tax savings can benefit you. We are not CPAs or tax attorneys, but we are experienced investors who understand the many tax advantages of owning rental properties. As experienced professional property managers in the Minnesota area, one of the first things we help people who are considering renting out their property to understand is how a properly managed residential rental property can have significant tax advantages for them.