Real Estate Tax Deductions - Rent vs Own

By Jennifer Cook

It is well known that home ownership allows many income tax advantages that those who rent do not receive. Two of those key deductions pertain to the mortgage interest and property taxes paid during the tax year in question. Although there are many other deductions when buying or selling a home, we will focus on those that you receive during home ownership as an owner-occupant.

The most significant deduction comes from the mortgage interest you pay throughout the year. Most likely your loan is "fully amortized" which means a portion of your monthly payment repays the debt and a portion is applied toward the interest. The portion which is applied to interest will typically be shown on a Form 1098, Mortgage Interest Statement, which is the annual statement sent to you from your lien holder. This amount is your deductible interest, providing you meet certain conditions. Please note, if your loan is "grandfathered", which means you obtained it prior to Oct. 13, 1987, all of your interest is considered deductible. Any loan obtained thereafter must meet certain conditions to be fully deductible, but luckily, those limiting conditions do not apply to most homeowners.

Another noteworthy deduction comes from your property taxes. These taxes are deductible if they are charged uniformly against all property and based on the assessed value. Be aware that some states and counties impose local special assessments for community improvements, such as for sidewalks, streets, or sewer lines. Although these items are also based on your property's assessed value, they are not deductible.

Also, charges for trash collection or homeowner association assessments are not deductible. However, there are some local property taxes that are used for maintenance, repair, or interest charges related to these benefits. These taxes would be considered deductible, but a careful analysis of your tax records is recommended to ensure proper documentation of your deductions. There are also deductions allowed for points paid to obtain your mortgage loan or to refinance an existing mortgage. Don't get this confused with loan origination fees that are not deductible but sometimes referred to as points.

Jennifer Cook is an expert and 6 year veteran to the residential real estate sales market in the Houston area. She specializes in The Woodlands, Spring, and Lake Conroe areas and has been a member of the highly acclaimed Dowdy Team for 3 years. For more information, visit her team website at http://www.har.com/jennrealtor

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Take Advantage of Rental Property Tax Deduction

By Eric J. Slarkowski

Rental property tax deduction makes a big difference. If you are a landlord, it is important that you take advantage of the full benefits such tax deduction provides. There are a number of ways you can avail these benefits, such as rent, payment to cancel a lease, expenses paid by the renter, etc. Some expenses that cannot be deduced include loss of rental income due to vacancy, expenses from modifications such as new appliances, a new roof or a room addition for example. However, the following are some of the more common deductible expenses:

Interest: Deductible interest includes mortgage interest payments on loans to either obtain or improve rental property. Interest on credit card payments made to purchase materials or services for purposes of the rental property may also be deductible. Interest is, actually, the largest deductible expense for individuals owning rental property.

Depreciation: The cost of the rental property can also be recovered through depreciation, which becomes available to you as a benefit beginning in the second year of ownership. Depreciation can be claimed as a deductible expense for 27.5 years.

Repairs: Certain repairs such as repainting, tiling, plastering, fixing leaks or replacing broken windows are fully deductible in the year the expense incurred. Keep in mind that the repairs must be necessary, reasonable in amount and not capital improvements. Of course getting cnc machines and tools to do the job is your own worry.

Travel: Landlords can take advantage of a deduction on expenses incurred for traveling to the property to talk to their tenants or make repairs. Travel expenses can also include travel to visit plumbing or electrical repair companies. Further, if the landlord is in another city he or she can even use airfare and hotel bills to claim deductions.

Home Office: If part of a landlord's home is used solely for purposes of their rental property business, they may deduct some of their home office expenses from their taxable income.

Losses: Losses can occur from fires or floods, but such costs associated with such losses may qualify for a tax deduction. It may be a partial or a full loss, but the actual deduction also depends on the insurance the landlord may claim.

Insurance: Premiums paid on insurance for their rental property can also be deducted. Applicable insurance includes fire, theft and flood insurance as well as landlord liability insurance.

Services: Fees a landlord may pay to attorneys, accountants, property management companies or real estate investment advisors may also be deductible. The services provided by these professionals must be for work specifically related to the rental activity, though.

Focusing on the area of woodworking tools, the author pens principally for http://www.insidewoodworking.com His articles on cnc machines and tools are found on http://www.insidewoodworking.com and various other online publications.

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