Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I've got a quick video on common Tax Deductions most real estate investors should know about.
Plain and simple, taxes will be the death of your income, so I want help you keep more of what you make every year. To do that, I've created a list of 8 common Tax Deductions most investors should know about…
1) Car/Vehicle Deductions – Only to and from the investment – record keeping, document mileage – standard mileage rate is 56.5 cents per mile in 2013. Use your truck to carry materials, signs, etc… maintenance is deductible.
Usually ask what percent is your car used for your business.
2) Mortgage Interest – mortgage interest payments on property improvements, credit cards for goods or services
3) Depreciation – some items like cars, expensive supplies, can be deducted all at once, whereas long term investments can be depreciated over several years.
4) Office Expenses – business office – For example, you may deduct the rent and utilities you spend for an office. If you are a renter, it enables you to deduct a portion of your monthly rent, which is usually not a deductible item.
* Calculated based on sq.ft. of the office – Sq.ft of room / total square ft. equals = Percent X Utility Cost
5) Business Travel Expenses – Going out of town – includes airfare or other transportation costs, hotel or other lodging expenses. Only deduct 50 percent of the cost of meals. If you plan things right, you can even mix pleasure and business and still get a deduction.
6) Employees and Contractors – Deduct wages as a rental business expense – property manager, independent contractors
7) Property Insurance – You can deduct the premiums you pay for almost any insurance for your rental, fire, liability, landlord… etc..
8) Legal and Professional Fees – attorneys, accountants, consultants, and other professionals – if the fees are paid for work related to your business.
IRS.gov Website on Tax Deductions
http://www.irs.gov/taxtopics/tc503.html
Although these are the more common real estate tax deductions, we still encourage you to consult with a real estate accountant. Your real estate business may require some creative accounting in order to maximize your deductions. Needless to say, it's very important to remember NOT to embellish your numbers especially if you in the higher tax bracket.
The IRS is always looking for these red flags, so remember to keep accurate documentation (receipts or an excel spreadsheet).
Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you'll be automatically notified when we upload more quick video tips for you. Take care and good investing.
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