As a cpa, one of the most powerful tax-saving strategies I often recommend for real estate owners is depreciation.
What does that mean and how can it benefit you?
Depreciation is a tax deduction that allows you to recover the cost of a property over time.
For residential rental properties, this typically means you can deduct a portion of the building’s value each year, lowering your taxable income. Also, capital improvements may qualify for depreciation.
Properties that qualify for depreciation are:
– Residential rental properties
– Commercial properties
– Vacation homes (if they are rented out)
Depreciation does not apply to land values. It’s strictly for buildings. It is important to separate the two when figuring out deductions.
Also, it’s important to know that depreciation can have tax consequences when you sell a property. It’s important to learn how this works to avoid unexpected surprises.
And… the rules are different for short-term stays such as in the situation of an Airbnb or VRBO.
Depreciation is complicated and there are strategies for accelerating it that may be applied in certain circumstances.If you’re a real estate owner, understanding it can help you to save big on taxes while staying compliant with IRS rules.
Got questions? Drop them below, or send me a message. I’m here to help you navigate the world of real estate taxes and make sure you’re optimizing your deductions!
My job is to help you get the lowest tax bill possible while making sure that you are following all the rules.
