Investing in real estate property is a time-tested way to build wealth. Even better? It also offers owners an opportunity to keep more money in their pockets come tax time.
As you consider your unique situation, assess whether leveraging any of these tax strategies might be right for you, and when doing so, be sure to consult with an accountant as tax codes are complex and can change.
Strategies for Maximizing Your Property Investment and Minimizing Your Tax Bill
Owning investment property in Central Ohio offers clear advantages, especially when it comes to reducing your tax burden. Here are some ways to ensure you’re making the most out of your real estate investment.
- Maximize tax deductions – Take as many deductions as you can. Investment property owners in Franklin County can write off expenses related to the operation, management, and maintenance of their property. This includes deductions for property taxes and insurance, mortgage interest, property management fees, closing costs, legal fees, and property maintenance expenses, among others. Business investors can also take advantage of deductions for things like office space, advertising expenses, and other qualified operational expenditures related to their investment property.
- Don’t discount depreciation – Because properties lose value over time due to wear and tear, the IRS allows investors to account for depreciation as an expense on their taxes. You can use this deduction for the length of your building’s lifespan as defined by the IRS. The allowed deduction amount is determined by the property’s market value, recovery period, and depreciation method used.
- Avoid double FICA taxes – Depending on how you are classified by the IRS, you could owe double FICA taxes at a rate of 15.3%. To avoid the double tax, you must demonstrate investment intent rather than being classified as a dealer.
These are just a few of the many tax opportunities investors like you can take advantage of as you grow your portfolio. Work with a professional accountant to ensure you are maximizing your tax benefits, and if you have questions specific to the Columbus-area rental market, get in touch with us at RL Property Management.