Rental Property Tax Deductions | Investing for Beginners

You know, my accountant likes
to say, if you are paying taxes and you're a real
estate investor, then chances are you're
doing something wrong. Today's video,
we're going to dive into the top tax deductions
for real estate investors. Hey there, everyone. I'm Clayton Morris. I'm the founder and
president of Morris Invest. We're a turn key
real estate provider. I've rehabbed hundreds of homes
and I'm a longtime real estate investor. And one of the great benefits
of real estate investing, of course, is the tax benefits. Again, my accountant, one
of the greatest accountants in the country for
real estate, has said, if you're a real
estate investor, you should not be paying taxes. You should be able to basically
not pay anything in taxes if you're a real
estate investor. So the problem is
that many people don't know or fail to take
advantage of all the great tax benefits of being a landlord. So if you own rental
properties or you're thinking about buying rental
properties and getting started, there are some
great depreciation, there are some great benefits
that you need to know about in order to save on your taxes.

OK, let's dive into it. So we're going to go through
10 of the top deductions that you can take if you've
got rental real estate. Now I want to be very clear. It's very important that you
work with a tax accountant that understands real estate. If they don't
understand real estate and you are building up
your rental portfolio, chances are, you need to
find a better accountant. OK? Because again, you should not
be paying anything in taxes if you are a real
estate investor. There are so many great ways
to leverage your properties. So you've got income
coming in from rent? Great.

Are you then also
making repairs? Are you buying
additional properties? All of those things
will offset the income that you have coming in. And maybe you have a salary
job, your normal 9 to 5 job. Great. Are you buying rental
properties in an LLC, and therefore
offsetting the money that you have coming in
from your 9 to 5 job. These are all ways that you
can mitigate your overall tax burden. Remember, the tax
code in this country, in the United States
of America, was written for entrepreneurship. It is incentivizing you
to invest in the economy and to be an entrepreneur. Almost the entire tax code
talks about all of the things you can claim. There's a very minimal amount
of things in the tax code where you actually get charged. So it really does
benefit you to take advantage of the tax code
the way that it was written. Remember, almost every member
of Congress owns real estate. Why? Well, because they
help write the laws.

They know that owning real
estate crushes your taxes. OK, let's dive into it. The top 10 things that you
can claim on your taxes for benefits. All right, the
first thing, and one of the most important
deductions that you can claim as a landlord is interest. So number one, interest. Now this can be interest
on mortgages, loans, home equity, lines of credit. If you are using financing
to acquire properties, interest loans is a write off. This is something that you
can claim against the income that you're bringing
in from your tenants on your properties. So number one, interest. Number two on the
list is depreciation. I'm sure you've heard
about depreciation. It is simply the ability for
you to say that this asset that you own, this
house, over 27.5 years, I'm able to say
that this asset is depreciating because a tenant
is living in the property. So the IRS lets you
depreciate this asset, which means you get to
depreciate a chunk of that cost on your taxes
every year for 27.5 years. That's an incredible
deduction that you should be taking advantage of.

The beauty is that just
because a tenant is living in there doesn't mean the
asset is actually worth less. No, of course not. Actually, real estate
tends to appreciate. So you get to claim depreciation
while your asset is probably appreciating. Another killer
strategy from the IRS. Number three on your
list is repairs. Now of course, all of the rental
properties that I buy we're doing a repair on. So I'm doing all
of the construction on these properties, and
those are a write off. That repairs are deductible
on your taxes in the year that you did the repairs.

So in 2018, 2017,
if you have to put a new roof on your rental
property, boom, tax deduction. Brilliant. You get to write
that off in the year that you did those repairs. So repairs help
offset any income that you have coming in because
you're improving the asset. You're improving
the neighborhood by improving your
rental property. Number four on the
list, local travel. I very often will fly
into my rental markets, or I'll drive and
rent a car, mileage. All of those things
are a tax deduction. So let's say you owned
rental properties in your own backyard. Then any time you
get in the car, have to drive down to
the property, you keep track of all
of that mileage. You keep track of
the automobile. Maybe you even own a business. So you own an LLC, you own the
rental properties in the LLC.

And you have a car that is
specifically geared just to running the business. You have to run back and
forth between your properties. You can claim part
of that vehicle as a business expense
on your taxes. So local travel, keeping
track of your mileage, keeping track of
all of those things. Incredibly important,
and again, a great write off if you own
rental properties. Number five, long
distance travel. OK, so forget properties
being in your backyard. I live in New Jersey. There's no way I would
ever buy rental properties in my backyard because as we
say in other videos here– we have videos here on ROI–
the ROI is just too low. I want to go into the Midwest
and parts of this country where I can get a
massive bang for my buck. Well, I'll fly out to
my different markets a couple of times a year. And all of that
travel, of course, is, you guessed it, a write off.

So my airfare, my hotel,
my rental car, my dinners, my meetings with my team,
all of those things. And the same goes
for you as well. If you're making a
flight into an area to see one of your
rental properties, that's all a write off. Number six on the
list is a home office. Now I run my business
from my home. I've got a door on the office
and a closet in my office, and therefore, I get to claim
my home office as a business expense. A portion of your home. So that means my printer,
my computer, all of that is a business expense. Now you as a landlord can
also claim part of your home, especially if you have an office
set up, as a business expense. Now you'll want to check
with your accountant to make sure you're
doing it right. But typically, you need to
have a door on that room, and it has to be used
just for an office.

Like, it can't be a bedroom
with a desk and a computer because you're
sleeping in that room. That doesn't count. So as long as it's
designated as a home office and you're using it as
your business office to be a landlord, and to
manage your spreadsheets, and to check your rental
income and all of those things, then you can deduct a portion
of that on your taxes. Again, check with
your accountant on how that all breaks down. But for me as a business owner,
my office, I use it every day.

I'm at my computer,
on the phone nonstop. So it absolutely is an office. I don't also sleep there. I guess sometimes I maybe
sleep in my arm chair that I've got in there. Get a little nap in
in the afternoon. Does that count? I don't know. I'll find out. I'll ask my accountant. All right, number
seven on that list is employees that
you get to deduct. So if you're hiring
contractors or if you have people on staff– like
we don't subcontract out anything on my company,
we have people on staff, employees that we pay. And also, we then
work with contractors. And you may work
with contractors to fix your roof, to
fix windows, et cetera. And all of those pieces
are part of this puzzle. You can claim their
wages on your taxes. That is an expense. That's a business expense. That is a write off. So again, you're helping
the broader economy here. This is why the tax code
was written this way, right? You're hiring people. You're improving a neighborhood. So that's why Congress
wants to incentivize you to take these advantages.

You can write these
things off on your taxes. Do not forget to do that. Number eight– and
this is something we don't want to have to talk
about, but casualty losses. That is number eight on
the list, casualty losses. What does that mean? Well, your rental house
is involved in a flood. If there is a fire. You can actually write
a portion of that off on your taxes as a loss. So casualty loss. Fire insurance, yes,
it will cover it. But they'll give you some room
to breathe here with the IRS to be able to write
that off on your taxes. So don't forget to write off
casualty losses on your taxes. Number nine on the
list is insurance. Now on every rental property I
own, I have rental insurance. I have insurance
on the properties. So any insurance you carry for
your contractors or anything, you get to write off the
premiums on your taxes at the end of the year.

Again, that is a
business expense. So any insurance
you're carrying, that is a write
off on your taxes. Do not forget that. People build in insurance
into their expenses when they're buying
a rental property, and they're thinking
about how that affects their cash on cash return. But remember that the insurance
that you're paying for is a write off at
the end of the year. So make sure you check
with your account and make sure you're
writing off insurance at the end of the year. And number 10 on
the list is paying for professional
or legal services. Any fee that you're paying to
a property management company or a lawyer is a write off. That's a business expense. So think any work that needs
to be done by your property management team.

Maybe the lease up fee that
they're going to charge you, $150 to do background checks
on the tenant before they put them in the property. Boom, that's a write off. They have to run out and do
some work on the property. Boom, that's a write off. You hire a lawyer to
draft up a contract. That is a write off. All of those things
round out one of the many reasons
why real estate investing is such a killer
way to save on your taxes.

Again, I hope you enjoyed
this list of 10 great ways to save on your taxes. We have other great videos
here on the channel. We talked about finding
out how to nail down ROI. If you want to buy
rental properties and have them done for
you, totally turnkey, we have a whole
playlist right here devoted to turn key
real estate investing. We have a DIY playlist as well. So if you want to get your
hands dirty and get in there and do the plumbing and
hang drywall yourself, you can watch those videos.

But most importantly,
please subscribe. Right there, that little button
and subscribe to our channel. We publish videos
multiple times a week. And we'll be back here
with another video. My goal is for you
to get out there and take action and become
a real estate investor. We'll see you next
time, everyone..

As found on YouTube

Leave a Comment

Your email address will not be published. Required fields are marked *