September 13th, 2019 3:38 AM by Eric Willner
Radio Show Notes 9/12/19 Thursday- It’s Tax Time And It’s A Great Time To Be A Landlord! Use These Landlord Tax Reduction Strategies!
By Eric Willner, Host of The Real Estate Show, America’s longest running daily radio show about real estate
It’s a great time to be a landlord!
Many of us including me are making record rental profits but this also means potentially record tax bills for landlords. This is because interest rates are still at historical lows and latest projections increasingly indicate that they are likely to remain low for some time to come as national governments around the world continue to respond to sluggish growth with a huge monetary stimulus in their country and more foreign investment comes here to the US.
Mortgage rates are still LOW, even for investment property. Now some economists are predicting that the base rate may for a while, with the consensus being for at least until after the 2020 elections. This has been great for me as what started in 2008 as a one off year of significant rental profits looks as if it could extend into 10 years+ of revenue generation beyond many landlords’ wildest dreams.
Let me explain, just as interest rates hit the floor back then, many landlords had significant accumulated tax losses that they were able to carry forward (indefinitely) and use against their future rental profits. (Isn’t real estate awesome?!! Over the last couple of years, they’ve worked their way through these losses to a point now where in the last tax year. They were making significant rental profits again.
The filing deadline of the September 15th is looming large for the coming tax year of 2018. I’m not looking forward to my tax return this year – it could be brutal! So what to do??
Tax Reduction Strategies for the Smart Landlord
My strategy as ever is to minimize my landlord tax bill. Firstly, let me clarify the situation. Tax avoidance is fair and fine, but property tax evasion is strictly illegal. I do not advise anyone to do anything illegal – ever! Landlords need to be careful they stay on the right side of the line.
I was talking earlier this week to one professional landlord who sees the current low interest rate environment as an opportunity to ramp up his property maintenance and improvement program on his rental portfolio. Over the last few years he has spent over $50,000 upgrading the properties, and therefore, his portfolio. As he explained he can offset these extra maintenance costs against rental profits. This has the benefit of reducing his tax bill now and also increasing the “rentability”, raising rents and income smoothing his future profits when interest rates do finally start to rise. Firstl, however, landlords should be aware of what their allowable expenses are on a rental property.
Remember, I am NOT an accountant, and do not give tax advice. These are merely ideas for you to discuss with your tax professional. That said, over the years I’ve developed several strategies for doing this. Here are a few of my favorite tax saving tips:
1. Claim for all your expenses.
Make sure that you claim for all your expenses when submitting your tax return. These should normally include:
• Advertisement costs
• Costs incurred when travelling back-and-to the rental property
• Telephone calls made (or text messages sent) in connection with the rental property
• Cost of permits, licenses, and occupancy or safety certificates
• Cost of bank charges (i.e. overdraft)
• Advisory fees e.g. legal and accounting
• Subscription to property investment related magazines, products and services
2. Vacancy Expenses
If for any reason your rental property is empty for any period of time; any expenses such as utilities or upkeep, and maintenance when the rental property is empty can be claimed as a rental expense.
3. Every landlord has a ‘home office’.
Even if you have just a single rental property; don’t forget that a landlord can claim expenses for running their rental business and the associated costs of running a home office.
4. Finance costs
Landlords that have borrowed money to purchase their rental property should ensure that they claim all the loan interest paid relating to the financing of their rental investments. This includes where a landlord may have borrowed money from friends or family or taken on credit card or personal loan debt in connection with their rental business. Remember it is only the interest on the loan and not any capital repayments that can be claimed.
5. Carrying forward losses
This can be a big one! Many landlords who have made significant ‘rental losses’ in previous years may not have even realized having never previously made a tax return. These landlords may now be making significant rental profits which they need to declare. They should therefore go back and calculate their rental losses from previous years. This is because these rental losses can be carried forward and set off against rental profits in subsequent tax years.
6. Capital gains avoidance
Landlords that are facing a large capital gains bill if they sell they rental property could avoid this if they are prepared to ‘move’ into their rental for a period of time (see your accountant) to claim personal residence potentially saving themselves tens of thousands of dollars in tax. The 1031 exchange is another strategy here too.
7. Wear and tear allowance
Landlord that let their property furnished can potentially claim expenses against the rent as an expense through the wear and tear allowance. This is allowed as the depreciation cost on the furnishing of their rental property.
8. Getting your return in on time
Finally, don’t be late! Why pay unnecessary charges and fees?
Saving money on your taxes is key. As you also know, in Real Estate, your credit is also key. That’s why we value our affiliation with www.TimeToFixMyCredit.com. Their goal is to help secure our clients’ financial future by repairing their credit, thereby improving their overall quality of life. There again, Technology Is Your Friend In Real Estate, and they use that technology to help you improve your credit. They provide personalized service to teach you the basics of credit, how to manage and maintain your credit once it’s repaired, and how to attain your financial goals, whether it’s buying a car, buying a home, or just living debt-free.
We pride ourselves on working with them, and by giving our listeners a personal consultation and relationship-building. Our clients are not a number to us. What brings us the most joy is when our clients not only reach their financial goals, but their life goals as well.
Obtaining a complete copy of your credit report is a very important first step. You can start by contacting me, and I’ll provide you one for free, and then you can continue to learn how at www.TimeToFixMyCredit.com. Remember, Your credit report can affect how much interest you will have to pay on a loan, what type of loan you are eligible for — if you can get one — and can even impact whether you can get a job.
In order for www.TimeToFixMyCredit.com to prepare a complete credit analysis, together we will contact the three major credit reporting agencies — Equifax, Experian, and TransUnion for — to dispute errors and discrepancies on your behalf.
Once we receive your credit reports, we’ll identify areas of concern and formulate a plan of action for your particular situation to ensure that you will benefit from our services.
We’ll meet with you for a personal consultation to discuss your credit, item by item, assessing if there is any fraud on your report, and how we can begin to repair credit issues that we discover. We will let you know exactly what we can and cannot do to repair your situation. All you need to do is keep calm, call us, and we can help you put together a plan, then stick to a plan and move forward.
Want to know more? If you are serious about real estate and paying off debt, then find out more on today and every day’s episodes and learn more about Real Estate Investing and learn HOW TO by listening to The Real Estate Show with Eric Willner , Live every weekday morning at 8 o’clock (EST) on Florida’s Money Talk Radio station WSBR AM740, FM 96.9, and FM 103.9. You can also hear us on the free apps: iHeart Radio and TuneIn. Recorded Rebroadcasts are available 24/7 on Facebook. Please share this and our Facebook updates.
Eric Willner is the Host and Founder of The Real Estate Show, an informative show about how to buy, own, and improve real estate the right way, on autopilot. - The Automatic Landlord way. (AutomaticLandlord.com) You can reach Eric Willner at Eric@Ericwillner.com or 888-595-7779.
Also listen to the rebroadcasts on demand on Facebook.com/TheRealEstateShow
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