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Critical Tax Strategy For Landlords


How to Use Depreciation to Lower Income

by Alex Davis

RealTaxTips.com

TReXGlobal.com

Woman throwing moneyBy maximizing depreciation deductions, you minimize taxable liability and save money on taxes. Since you cannot immediately write-off the purchase cost of investment property, you must deduct the acquisition cost over the life of the property using depreciation.Most rental owners are able to turn profits after collecting rent and paying rental expenses, so depreciation deductions can be used to turn their profits into tax losses. That’s why rental property is considered such a good tax shelter – because you can report a loss even though you are making a profit.

For example, you collect $12k rent for the year and paid $8k in rental expenses like mortgage interest and property tax. If you took no depreciation deduction, you would have to claim $4k in rental income on top of your regular income… but after a $6k depreciation deduction (typical for property worth $165k), you will claim a $2k loss while still making a $4k profit.

For more Tax Tips and Tax Saving Web Tools like DepreciateEm.com and DeferEm.com, check out TReXGlobal.com.

Click here if you missed Home Office Deduction.

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Posted on Thursday, October 2nd, 2008 at 9:34 am and is filed under AAOA Forum. You can follow any responses to this entry through the RSS 2.0 feed.

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12 Responses to “Critical Tax Strategy For Landlords”

  1. [...]  Use Depreciation to Lower Income   Spread Out Repairs    Utilities that Landlords Pay   American Apartment Owners Association offers discounts on products and services related to your commercial housing investment including REAL ESTATE FORMS, tenant debt collection, tenant background checks, insurance and financing.  Find out more at http://www.joinaaoa.org.   To subscribe to our blog, click here.   [...]

  2. [...]  Use Depreciation to Lower Income   Spread Out Repairs    Utilities That Landlord Pays    Auto Expenses You Can Actually Deduct    American Apartment Owners Association offers discounts on products and services related to your commercial housing investment including REAL ESTATE FORMS, tenant debt collection, tenant background checks, insurance and financing.  Find out more at http://www.joinaaoa.org.   [...]

  3. [...]   Did you miss these tax tips:    Home Office Deduction  Use Depreciation to Lower Income   Spread Out Repairs   Utilities That Landlord Pays   Auto Expenses [...]

  4. [...]   Did you miss these tax tips:    Home Office Deduction  Use Depreciation to Lower Income   Spread Out Repairs   Utilities That Landlord Pays   Auto Expenses [...]

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