Operating Expenses incurred via the
operation and maintenance of an income producing property
are tax deductible. They include such things as
accounting fees, advertising costs, legal fees, insurance premiums,
janitorial service, lawn maintenance service, leasing commissions,
license fees, office supplies and expenses, pest control, property
management fees, property taxes, repair costs, salary and wages,
snow removal service, misc. supplies, telephone, trash removal,
vehicle mileage expenses, utilities, etc.
paid on any loan or loans secured by income property is tax deductible.
paid on any mortgage or loan secured by an income producing property are
tax deductible over the life of the loan. For example, if you
obtain a $100,000 loan with a 20 year term and you pay 1 point to
obtain the loan, you can write off $50 a year on your taxes over the 20 year
period for a total of $1,000. If you sell the income
property and pay off the balance of the mortgage early, you can
write off all unused points in that year.
Closing Costs connected with
obtaining a loan for an income producing property such as mortgage
insurance premiums, fees for an appraisal required by a lender,
title search fees, loan origination fees, recording fees and
abstract fees are tax deductible over the life of the mortgage.
is the loss in value of an asset or building over time due to wear
and tear, physical deterioration and age. The depreciation tax
deduction works like this. The IRS allows you
to depreciate income producing properties over their useful life
which is determined by law. Current law stipulates that
residential income properties must be depreciated over 27.5 years
and commercial income properties over 39 years. For example,
you purchase a warehouse for $900.000 in January. The land
where the warehouse resides is valued at $120,000. The
building is valued at $780,000. Commercial property is
depreciated by equal amounts annually over the 39 year period.
Since you purchased the income property in January, the IRS rules
allow you to write off 11 1/2 months of depreciation in the first
year or $19,167, 1/2 month of depreciation for January and 11 full
months of depreciation for the remainder of the year. For the
next 38 years you would deduct $20,000 a year and in the 40th year,
the final year, you would write off the remaining 1/2 month of
depreciation , $833.
are subject to the same depreciation method as the building above.
Capital improvements include a new roof, new siding, a new addition to a
building, etc. Capital improvements to a residential income property
are tax deductible and can be depreciated over a 27.5 year period. Capital improvements to a
commercial income property are tax deductible and can be depreciated over 39 years. Improvements
to land such as a retaining wall can be depreciated over a 15 year period.
Property includes such items as
furniture, appliances, lawn mowers, snow removal equipment,
etc. which are not permanently attached to the land. Depending
on the type of property, personal property can be deducted over a recovery period of 3, 5, 7, or 10
years. Check with your accountant to determine the
appropriate recovery period for a specific type of personal
||If you are considering purchasing income producing properties,
the On Target real estate investment software provides powerful
analysis to assist with the decision making process.
The On Target input screens include a list of tax deductions
/ tax write offs affiliated with income producing properties. On Target costs just
$99.95 and can give you the edge over other investors. Click
to order On Target. Click on Software Features to learn
about On Target's powerful investment analysis
features. Software Features
The On Target real estate investment software includes a 30 day money
back guarantee and free support.
Copyright 2000 to 2014 Advantage Software LLC