Las Vegas Property Management Blog, the G-Gram

Last Minute Rental Property Tax Deductions

George Trombley - Monday, April 9, 2018

 

LAS VEGAS, NV. - Are you planning on waiting until April 15th to file your income taxes? You're not alone. 

Like most owners you're busy so it's not uncommon to wait until the deadline to file your income taxes as long as you get them done.

The good news is that there are a variety of deductions you may be able to benefit from including the following:

1. Rental Property Depreciation

Depreciation is the process of treating the hypothetical wearing out of your building as if it were an expense. Even though you may not financially feel this wearing out, accounting principles allow you to take advantage of the eventual costs through depreciation.

Determining what the depreciation figure is, and keeping proper records over time is vital, and you should turn to your CPA or tax professional for assistance. Generally, you can depreciate your rental property value minus the cost of land evenly over 27.5 years, known as straight line depreciation.

Depreciation Example for Rental Property

We’re going to illustrate a straight line depreciation example that pertains to a rental property.
 
Let’s assume the following:
 
The combined value of the land and the building is $300,000
 
The land is valued at $150,000
 
The depreciation time frame according to the IRS is 27.5 years
 
The property is classified as a residential property (Some portions of commercial property improvements can be depreciated over 15 years)
 
To figure out the depreciation, you first subtract the land value from the combined value of the land and building.
 
Then you divide the building value by 27.5 years to get the amount of yearly depreciation.
 
$300,000 – $150,000 = $150,000
 
$150,000/27.5 = $5,454.54 depreciation per year
 
5,454.54 is the annual amount you can deduct when filing your rental property taxes. You will do this each year to assess current home value and the associated annual depreciation.
 

2. Mortgage Interest Deduction & Other Forms of Interest
 
Interest on a rental property may take several forms: mortgage interest, points and loan origination fees, interest on credit lines and unsecured loans for the property, and in some cases interest from credit cards used for property-related expenses.
 
When you make a loan payment on your rental property, there are two components to that payment. There is the portion going to the principal and the portion paying back interest. You can see this by looking at your monthly statement. Unfortunately, you can’t deduct the principal portion of your payment. However, you can deduct the interest portion.
 
For example, let’s say you have a mortgage or other loan related to the property with a monthly payment of $1,000.
 
Let’s assume $200 is applied to principal, meaning $800 is interest. Only the $800 is deductible as an expense. Multiply this interest by 12 and you find your annual interest deduction of $9,600.

Learn more here

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