What Are the Tax Benefits of Owning an Orlando Rental Property?Liam Pool
Orlando rental property owners need to declare the income they earn from their investments at tax time, but this shouldn’t deter you from investing. The benefits far outweigh the costs when it comes to tax implications for rental properties.
Here are some of the tax benefits you can expect, as well as an example of the accounting we do for you as your Orlando property managers.
Property Depreciation is a Huge Tax Benefit
One of the best ways to limit your tax liability as a rental property owner is by using depreciation as a tax deduction. Even if your property is increasing in value, the IRS allows you to deduct a specific amount in depreciation every year.
You need to be precise when you’re calculating what you can deduct in depreciation, and it’s important to remember that you can only take the value of the property into consideration. You cannot depreciate the land you own.
The most recent IRS guidelines provide for a rental property lifespan of 27.5 years. So, you’ll use that number to calculate your depreciation. Divide the cost of your property at the time you acquired it as a rental by 27.5. That’s the amount of depreciation you can include in your tax return.
Orlando Rental Property Maintenance Expenses
Most of the costs associated with maintaining your rental property can be deducted on your taxes. This includes repair costs and any materials that you need to keep your property in operable condition, such as paint, drywall, smoke detector batteries, air filters, and other supplies.
Keep in mind that you cannot deduct the costs of improving your home. If you renovate the kitchen or add a bathroom, those expenses are not tax-deductible. You may only deduct what it costs to maintain your Orlando rental property.
Deduct Your Professional Fees and Mortgage Interest
If you have a mortgage on your Orlando rental property, you can deduct the amount you pay in interest on that loan. You can also deduct any professional fees you pay that are associated with the rental property. These might include:
- Property management fees
- Insurance agent commissions
- Attorney costs
- Accounting costs
- Real estate commissions
Rental property owners can also deduct any advertising or marketing fees during the leasing period.
Monthly Property Management Accounting
At Homevest, we prepare monthly owner packets that include all your accounting statements. You’ll see a breakdown of income, expenses, and other financial indicators that tell you how your property is performing. This helps you stay informed, and it also prepares you for tax filing and reporting. We’ll provide a detailed cash flow comparison report as well.
As your property managers, we’re working to provide a full asset management experience. We know that HOA tax benefits and requirements are different, and we customize our approach to accounting and reporting to meet what you need.
If you have any questions about how to handle taxes as a real estate investor in Orlando, we invite you to contact our team at Homevest Management. We provide expert Orlando property management, real estate, property rentals, and HOA management. We serve all of central Florida, including Winter Garden, Doctor Phillips, Baldwin Park, Winter Springs, and Windermere.