Understanding Tax Deductions for Real Estate Professionals

 

 

As a real estate professional, you are likely familiar with the importance of maximizing your deductions in order to lower your taxable income and reduce your tax liabilities. One way to do this is by taking advantage of various tax deductions available to real estate professionals for expenses related to their rental properties. In this article, we will discuss some of the most common tax deductions for real estate professionals, including mortgage interest, property taxes, depreciation, travel expenses, repairs and maintenance, insurance, and legal and professional fees.

 

Mortgage Interest Deduction

Real estate professionals can deduct the interest they pay on their mortgage loans for their rental properties with the mortgage interest deduction. As a result, taxable income can be reduced significantly, as can tax obligations. Real estate professionals must attach Schedule E (Supplemental Income and Loss) to their tax return in order to claim the mortgage interest deduction. To support the deduction, they must also have a record of their mortgage interest payments, including receipts and invoices.

 

Property Tax Deduction

Real estate professionals can deduct the amount of property taxes paid on their rental properties with the property tax deduction. As a result, taxable income can be reduced significantly, as can tax obligations. Real estate professionals must attach Schedule E (Supplemental Income and Loss) to their tax return in order to claim the property taxes deduction. To support the deduction, they must also have a record of their property tax payments, including receipts and invoices.

 

The Depreciation Deduction

Real estate professionals can deduct the cost of their rental property over time with the depreciation deduction. As a result, taxable income can be reduced significantly, as can tax obligations. Real estate professionals must attach Form 4562 (Depreciation and Amortization) to their tax return in order to claim the depreciation deduction. In order to accurately calculate the depreciation deduction, they must also keep a record of the rental property’s cost and estimated useful life.

 

Deduction For Travel Expenses

Real estate professionals are able to deduct the cost of travel related to managing their rental properties through the travel expenses deduction. This could include things like travel, lodging, meals, and airfare. Real estate professionals must attach Schedule E (Supplemental Income and Loss) to their tax return in order to claim the deduction for travel expenses. To support the deduction, they must also have a record of their travel expenses, including receipts and invoices.

 

Repairs and Maintenance Deduction

Real estate professionals can deduct the cost of maintaining their rental properties through the repairs and maintenance deduction. As a result, taxable income can be reduced significantly, as can tax obligations. Real estate professionals must attach Schedule E (Supplemental Income and Loss) to their tax return in order to claim the deduction for repairs and maintenance. To support the deduction, they must also have a record of their expenses for repairs and maintenance, including receipts and invoices.

 

Insurance Deduction

Real estate professionals are able to deduct the cost of premiums for a variety of insurance policies, such as liability insurance, property insurance, and casualty insurance, through the insurance deduction. As a result, taxable income can be reduced significantly, as can tax obligations. Real estate professionals must attach Schedule E (Supplemental Income and Loss) to their tax return in order to claim the insurance deduction. To support the deduction, they must also have a record of their insurance premiums, including receipts and invoices.

 

Reference:

https://www.aicpa.org/resources/article/tax-rules-for-real-estate-professionals

https://www.thetaxadviser.com/issues/2014/jul/skarbnik-july2014.html

https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf