Your Monterey real estate investment can provide you with a monthly income as well as tax incentives. Learning about all potential deductions on your real estate investment prevents you from paying more in taxes than required.
Mortgage interest is one of your biggest tax deductions, but other types of interest are tax deductible as well. If you take out a loan for improvements to your Monterey real estate investment, or if you use a credit card to purchase goods used in the investment property, you can deduct this interest as well.
You can deduct the cost of repairs, but you must take that deduction the same year that you incur these costs. Any changes to your real estate investment must meet the standard of being necessary and reasonable for these changes to be repairs, not improvements. You must restore the broken element to the condition it was in before it stopped working. It must not be improved, replaced or upgraded. You can also deduct the costs of preventative maintenance as part of your operating expenses.
Owning a Monterey real estate investment often requires local or long distance travel. These expenses are also tax deductible. You can use the Internal Revenue Service’s standard mileage rate, or you can deduct actual expenses, such as gasoline for your vehicle, meals, hotels and airfare. You must keep proper records for these expenses because auditors closely examine these to ensure that the expenses are actually business deductions and not personal expenses.
If you hire someone to perform work on your Monterey real estate investment, the amount you pay for the person’s wages are tax deductible. This applies if you hire someone as an employee or as an independent contractor. If you hire an independent contractor, you must obtain their Tax ID number and submit a 1099-MISC form if you paid them over $600. You may deduct the cost of employees’ health insurance if you provide this benefit. If you incur legal fees or use a property management company, these expenses are also tax deductible.
Protect yourself by purchasing in a good insurance policy for your Monterrey real estate investment, and be sure that you have landlord liability coverage in addition to coverage for fires, floods or thefts. The cost of insurance premiums is tax deductible.
Owning a Monterey real estate investment can provide you with many options for tax deductions, but you must know about these deductions to take full advantage of them. If you have questions about what you can count as a deduction, consult with an accountant to protect yourself and your investment.