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
Jasonpathfinder3

What You Need to Know About SECURE 2.0 and Its Effect on Retirement Plans

Jason Wheeler - Pathfinder Wealth Consulting
Untitleddesign2 4523114356

Cybersecurity and Productivity: Striking the Perfect Balance for Business Success

Barrett Earney - EarneyIT
Untitleddesign2

The Importance of Real Estate Appraisals

Steve Mitchell - Cape Fear REALTORS®

Trending News

Conservation Group Signs $8M Deal To Buy The Point On Topsail Island

Audrey Elsberry - Mar 26, 2024

National Organization Bestows Top Award On Cape Fear Professional Women In Building

Staff Reports - Mar 26, 2024

Engineering Firm Hires Four Employees

Staff Reports - Mar 26, 2024

N.C. Ports Officials React To Baltimore Bridge Collapse

Audrey Elsberry - Mar 26, 2024

NCino's Fourth-quarter Earnings Signal Rebound From Liquidity Crisis

Audrey Elsberry - Mar 27, 2024

In The Current Issue

Park Progress

The planning for Pender Commerce Park began in the early 2000s when the county wanted to create an economic driver on its largely rural west...


Hacking Cyberdefense Shortage

A shortage of cybersecurity professionals influenced professor Ulku Clark and her team to slowly evolve UNCW’s offerings to now include eigh...


MADE: Polyhose Inc.

Polyhose manufactures and fabricates hose protection, paint hose assemblies and rubber hydraulic assemblies from its Pender County facility....

Book On Business

The 2024 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2023 Power Breakfast: Major Developments