Email Dave Email
Financial
Nov 19, 2015

The Tax Advantages Of Owning Rental Properties

Sponsored Content provided by Dave Sweyer - Owner and Broker, Sweyer Property Management

With the end of the year approaching, many of us are being distracted by visions of sugar plums and thoughts of the holidays. For investors, business owners and contractors, however, it’s a time of year when a concern about tax liabilities has the potential to cast a shadow over any holiday gathering.

Even for an employee anticipating a refund, it’s always interesting to think of strategies for reducing gross taxable income. The good news is that owning a rental property can be an extremely effective means of offsetting other forms of income.

In addition to mortgage interest and real estate taxes, the standard operating expenses associated with owning a rental property can be used as a tax deduction. These costs may include repairs and maintenance, insurance, utilities and property management, as well as local travel to and from the rental property.

Expenses for hotels, meals and airfare can even be deducted for investors who own rental property that is located far away from their local area. This could be a viable strategy for anyone who would like to consistently visit a destination with great beaches or a lively riverfront, for example, but expenses like these are closely scrutinized by the IRS.

Probably the biggest advantage to owning a rental property is depreciation. This allows the owner of a rental property to deduct a portion of the property value off their gross annual income for 27.5 years. Consider that the yearly depreciation deduction for a property that cost $200,000 would be $7,273, and it is easy to see why savvy investors choose rental properties.

No other form of investment offers the benefit of depreciation. In the example mentioned above, the investor could have a positive cash flow up to $7,273 and it would be tax free. With multiple rental properties in play, the effects become much more significant.

The advantage of depreciation is compounded by the fact that rental properties have the potential to appreciate in value. In a stable real estate market, or one that is rapidly improving such as Wilmington, this can create a tremendous upside. It’s worthwhile to note, however, that it’s only the cost of the actual, physical structure that can be depreciated, not the land, since the value of land never goes away.

There are many other tax advantages associated with rental property. Since repairs are deductible, any update that is being considered should be performed while the home is being used as a rental. Doing so will often result in A) higher rents and B) lower vacancy levels. Fees for professional services can also be a deduction. These can include fees paid to an attorney, licensed property manager or accountant for help with a rental property.

Aside from the potential of real estate to build wealth, which I wrote about in a previous article, the tax advantages alone make it worthwhile to consider purchasing a rental property. Of course, anyone looking to invest should consult with a qualified tax advisor prior to making a decision.

For help with managing an investment property, please send an email to our office at [email protected], or visit www.WilmingtonForRent.com.    

Sweyer Property Management has been providing real estate property management services and long-term rentals to the Wilmington area since 1987. The company continues to be the industry leader with more than 1400+ units and more than 20 employees. Sweyer Property Management has exhibited continuous growth throughout the Wilmington, Leland and Hampstead areas while maintaining a 4.8 Google+ rating for customer service. To inquire about the company’s full-service management services, or to take a tour of houses for rent in the area, email [email protected], or visit WilmingtonForRent.com. You can also Like and follow the Sweyer Property Management Facebook page to get property management tips or see properties for rent.

Other Posts from Dave Sweyer

Sweyer animated 300x250 ad
Ico insights

INSIGHTS

SPONSORS' CONTENT
Mikestonestreetcropped 862150530

Questions About Filing Your Association's Federal Income Taxes? We've Got Answers

Mike Stonestreet - CAMS (Community Association Management Services)
Natalieenglish headshot

MODERNIZE OUR DOWNTOWN LIBRARY AND MUSEUM

Natalie English - Wilmington Chamber of Commerce
Webversion mcwhorter heather profile 20211004 9030 orig

Impact Of UNCW Research

Heather McWhorter - UNCW Center for Innovation and Entrepreneurship

Trending News

Wilmington Startup Signs On Former NFL Player

Johanna Cano - Jan 27, 2022

OPINION: A Commonsense Approach To Housing Affordability In NHC

Rob Zapple - Jan 27, 2022

Midtown Apartment, Townhouse And Cottage Project To Bring 580 Units

Johanna F. Still - Jan 28, 2022

'Seabird At Home' Introduces Fine Dining Dinner-for-two Takeout

Scott Nunn - Jan 26, 2022

Offshore Wind Farm Visualizations Released; Wilmington Chamber Endorses Lease

Johanna F. Still - Jan 28, 2022

In The Current Issue

App Enhances Guest Interactions

After taking a personal trip that included a stay at a hotel, Jose Quiros was surprised to find that the hotel industry was still using trad...


Info Junkie: Kimberly Lupo

The founder and CEO of Portrett Pharmaceuticals, Kimberly Lupo, shares her top tech and info picks....


Downtown In Demand

While suitable live, work and play space – and places to create more – are in high demand in downtown Wilmington, the inventory is low. But...

Book On Business

The 2022 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

Trying to Grow a Business?
2020 Health Care Heroes
2020 WilmingtonBiz 100