What are some of the tax benefits to owning rental property?

Discussion in 'After Hours Lounge (Off Topic)' started by Drew Bethel, Jan 26, 2004.

  1. Drew Bethel

    Drew Bethel Screenwriter

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    I'm trying to get a feel for what you can write-off in addition to depreciation.
     
  2. Scott Merryfield

    Scott Merryfield Executive Producer

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    You can write off any expenses related to the property -- including mortgage interest, taxes, utilities, maintenance, travel, etc. The usual strategy is to show a loss on the property, which can then help with your general income taxes. Unlike other small businesses, you can show a loss every year on a rental property business.

    We own a condo in Myrtle Beach that we rent out. We can write off our travel expenses to/from the area, as well as some of our expenses while down there (such as meals). Between the rental income and write-offs on our taxes, we about break even versus expenses (not including appreciation of the property, which has been non-existent the past few years anyway). Since we like going to the area anyway, it works out for our situation.

    FYI, there are limits as to how many days you can use a rental property personally before it can no longer be classified as a rental for tax purposes -- I believe it is 15 days per year.
     
  3. Drew Bethel

    Drew Bethel Screenwriter

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    Thanks Scott.

    Any input on being able to write off purchases like a new computer/printer, dsl, and other niceties if it is used to "manage" the property?
     
  4. Scott Merryfield

    Scott Merryfield Executive Producer

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    Our accountant does write off part of those equipment costs and ISP charges against the rental business. Since I use Quicken for record keeping and electronic bill payment/banking for the business, as well as correspondence with the rental management company and condo association, it's legit. I am not sure what percentage she writes off, though. It's even more complicated for us, though, since I also use the computer and ISP as part of my primary job.
     
  5. MickeS

    MickeS Producer

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    Why is that allowed to be a write-off? That just seems odd.
     
  6. Drew Bethel

    Drew Bethel Screenwriter

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    >>Why is that allowed to be a write-off?
     
  7. Scott Merryfield

    Scott Merryfield Executive Producer

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    As Drew stated, there is a need to check up on the property, make sure the management company is performing proper up-keep, etc. We also check to see if some smaller items, such as silverware, plates, cups, etc. need replacing, and may do some small repairs ourselves. If any larger items need replacing (such as furniture, etc.), we usually take care of that while onsite, too.

    If you are looking into a rental property strictly as a profit/loss situation, there are probably better ways to invest your money. If there is a certain area of the country you like to travel to anyway, though, there are some benefits. Of course, there are lots of hassles with a rental property, too, even if you have a management company that deals with booking the rentals, as we do.

    We have friends who purchased a small 2nd home locally and rented it out for several years. Even though the rent more than covered the monthy expenses of the property, they eventually grew very tired of all the hassles of being a landlord and sold the property.
     

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