09 Jan Tax considerations for investment properties
If you’ve purchased an investment property this year, you may be able to realize some tax savings. Here are a few considerations to keep in mind when filing your taxes this year.
The mortgage interest from a commercial real estate investment property is tax deductible. New tax laws may affect the way deductions are claimed for mortgage interest on investment properties. You can check out this IRS publication for more information about how new tax legislation affects businesses.
Depreciation on rental properties
The depreciation on your investment property builds up over time and could potentially offset your tax liability. The IRS depreciation rate varies depending on whether you purchased a residential rental property or a commercial rental property. The IRS allows a deduction for depreciation on residential rental properties for up to 27.5 years and up to 30 years for commercial rental properties.
Capital gains tax rate
Are you looking at selling your investment property as potential retirement income? There are advantages when it comes to the capital gains tax for selling an investment property as compared to other retirement investments such as an IRA. The capital gains sales tax is much lower than the rate for an IRA withdrawal.
Maintenance and renovations and other property expenses
Any maintenance, upkeep or renovations you make to improve an investment property can potentially be a tax deduction. If you purchased a condo, you may be able to deduct the condo fees if you use this property in the course of your work. Even if you live and work in the condo, some of the fees may still be deductible depending on its use.
Your tax advisor can give you further details on tax considerations for investment properties. Do you have your eye on your next investment property? Barsh & Cohen can handle all the legal paperwork for you. Contact us for a consultation.