Tax time has a way of slashing your hopes for smooth and stress-free passive rental income. Even if you do everything by the book, there's still a lingering feeling of anxiety that comes each year.
What if you miss something? What if you made a mistake that will come back around to bite you? These fears ease up when you have a better understanding of rental property tax and how it works.
We're going to work through some rental property tax basics today, giving you insights you'll need to move through this tax season with a sense of ease. Hopefully, you can use the insights below to inform how you handle your year-end rental property taxes.
Let's get started.
Rental Property Tax Essentials
The first thing to think about is your record keeping. No matter how complex your situation is, you'll be able to handle it effectively if you keep concise records of the income and expenses that run through your property.
If you're not sure how well you've been doing, gather all documents and receipts that you have available. Get everything in one place so you can go through it all with a tax professional if necessary.
Whenever possible, scan relevant documents and keep them organized in computer files. This helps streamline the process when you do your taxes or send documents to your professional.
Make sure to look at the specific tax rate in your county as well. Rates range across the United States from .03% all the way up to 2%.
Utah's property tax rate is around 30% lower than the national rate, coming in at around 0.58%. Rates vary by county, though, so it's important that you take a close look at your area and see what you're expected to pay.
Rental Property Deductions
There are lots of things you might not think to write off. That said, tax-deductible expenses are everywhere you look when you're reporting rental property income tax.
Any marketing you do, leasing fees, professional services used, interest paid, depreciation, and any driving you've done in a business capacity can qualify for a tax deduction. It's best to take a look at what the IRS says is deductible when you own a rental property.
Their rules are subject to change so it's wise to take a look each season to see if there are any adjustments.
Tax Advantages of Rental Property
One of the beautiful things about rental property is that a lot of your costs and liabilities are subject to tax write-offs. The costs associated with maintaining and repairing your rental property are deductible.
Depreciation write-offs are another huge benefit for property owners, and there's even the option to use a capital gains deferral. It's always a good idea to work with a tax professional when you're handling these taxes, though.
Write-offs are simple on paper, but handling them the correct way is another story in some cases.
Want to Learn More About Owning Rental Property?
Hopefully, our look at rental property tax was useful to you. There's a lot more to learn about getting the most benefits possible, though. Owning rental property can be an excellent way to build wealth but it's not always easy.
We're here to help. Contact us to learn more about rental properties, property management services, and a whole lot more.
