Want To Reduce Your Property Taxes? Here Are 10 Proven Tips!

Dated: July 14 2020

Views: 3

calculator and paper

Inflated real estate taxes is one of the biggest problems faced by real estate investors. It is even more disturbing to know that most investors do not know they are overpaying. This is why we recommend that investors know the tax deductions available to them. You can lower your property taxes significantly by taking advantage of the tax deductions offered by the IRS. This makes you spend less on running your rental property.

Let’s take a look at some of such deductions below:

1. Loan Interest

Buying your rental properties via mortgage makes your loan interest the most significant deductible expense from tax. Other deductible expenses include credit card interest and interests from loans you got to fund improvements. Navigating your way through these on your own can be challenging. Consider hiring a financial advisor or accountant to offer professional help.

2. Maintenance and Repairs

You can enjoy deductions on cleaning HVAC filters, fumigation, landscaping, painting, and other repair and maintenance costs. The same can be extended to labor costs involved in the project (if you bring in a contractor). Otherwise, you can only deduct expenses for tools and equipment used in the project. Lastly, you are entitled to tax deductions on homeowner association fees, condo fees, and related fees.

3. Legal and Professional Fees

Another avenue to reduce property taxes is to deduct tax from professional fees on your rental property. This means that your property management fees, real estate agent commissions, lawyer fees, and accountant fees are all tax-deductible. This also applies to legal and court filing fees in the event of an eviction. Advertisement expenses are also tax-deductible, provided you advertise your rental property online, on radio, or in newspapers.

4. Rental Property Depreciation

The rule of thumb states that wear and tear of a property will make it lose value over a specific period. This means that you are entitled to depreciation claims once you put your residential property up for rent. The deduction is usually spread over the estimated lifespan of the property and is payable even if the property is yet to be occupied.

5. Utilities

If you pay for utilities like gas, electricity, water, heating, and AC for your tenant, then you can expect these expenses to be tax-deductible. The same applies to internet, cable, or satellite charges.

6. Travel

Whatever travel-related expenses you incur in respect of your rental property are tax-deductible. Perhaps, you made a trip to the suppliers to pick up repair materials or the repair company travel to fix an emergency in your rental property; you can deduct tax from the expenses. There are two models to choose from when deducting travel expenses. The first is to use the standard IRS-approved mileage rate. The second is to deduct the actual expenses, perhaps for gasoline, repairs, and upkeep. The same applies to airfare, hotel bills, and meal expenses for overnight trips. Note that this is only applicable if you drive an SUV, van, or pickup for your rental activities. Likewise, you must provide adequate records of long-distance travel expenses. Away from rental property tax deductions, let’s consider other means of reducing your property taxes significantly.

7. Make proper comparisons.

The property tax information is not confidential information – anyone and everyone can get their hands on it. Use this information to compare the assessed value of your rental property to the real estate comps (similar properties) in your neighborhood. If you find any inconsistency, enlist the services of an independent home appraiser to confirm or debunk it. Such an expert must be a registered member of a professional association, with proven experience in investment property assessments.

8. Contest your assessment.

Tax assessors are not infallible – they make mistakes too. This is why you should check through your assessment for any possible error. You can get the information online via the county administrator’s office or from your property card obtainable at the local assessor’s office. You should look out for errors in details like the year of construction, heating/cooling system type, square footage, and the number of bedrooms and bathrooms. Other areas of interest include your property’s structural condition, special features, and inconsistencies in improvements or structural changes.

9. Consider improvements carefully.

Everybody wants their rental property to stand out and be up to taste. Perhaps, you want to introduce an outdoor pool or indoor gym to attract tenants? It may appear to be a great decision on paper. However, the truth is such improvements will only compound your property taxes. This is why you must rethink every massive change or improvement to your investment property before proceeding. More importantly, understand the tax implications and see if they help your property taxes.

10. Do not buy an investment property without checking the tax history.

Checking the tax history of an investment property you want to buy will give you an idea of the amount payable in taxes. If this fits into your budget, you can go ahead to buy. Final Thoughts Our discussion so far has shown that it is not impossible to lower your property tax bill. It is easier than you may have thought. All you have to do is put these tips into practice and expect a better return on investment on your rental property.

Latest Blog Posts

Finding An Inexpensive MDU For Sale: 7 Proven Methods

Any residence with two or more units in the same building is referred to as a multi-family property or multi-dwelling unit (MDU). This kind of home comes in various structures, including the,

Read More

Cash-On-Cash Return: How To Calculate The Metric For Any Rental Property

Cash-On-Cash return analysis is crucial data for evaluating the rental property and finding out its return on investment (ROI). This data is most important to real estate investors who wish to fund

Read More

How To Find The Most Profitable Long-Term Rentals

Basically, long-term real estate investment involves purchasing a property only to rent it out to tenants for a long time. Since real estate investors do hold the property for a long period (at

Read More

5 Points to Consider Before Purchasing an Apartment

Some guidelines are attached to investing in apartments to achieve a positive outcome in the long run. You may end up with a bad investment by rushing into purchasing an apartment without

Read More