Maximizing Tax Deductions: 8 Essential Tax Tips for Property Investors

As a property investor, your main concern should always be saving money. The more money you can save, the more you will have to reinvest. Aside from development and management fees, taxes are a major expense. Did you know that there are ways to maximize your tax deductions and claim back money you have paid in past years or reduce your tax bill in coming ones?

Maximizing tax deductions can be very complicated and isn’t necessarily something you can do on your own. In all likelihood, you will need a professional’s support. A professional will be able to work with you to maximize deductions and save you money, but more on that later. For now, here are eight essential tax tips you can use to bring down your taxes.

Depreciation Deductions

The first thing you need to know if you want to maximize tax deductions is that if your properties depreciate in value, you can make deductions. An expert in business accounting can explain depreciation schedules to you in more detail, but at a very basic level, if there is any wear and tear on buildings you own, you can claim money back. You need a professional depreciation schedule before you can do this, however.

As well as wear and tear on buildings, you can claim depreciation deductions if fixtures or appliances have gotten damaged. It is important to keep records of any repairs or maintenance you make, so you can give them over to your accountant when they are working out the depreciation schedule for you. If you do not have receipts to verify repairs, there is no guarantee you will be able to make deductions.

Deduct Loan Interest

Did you know that interest incurred on investment property loans is fully tax-deductible? However, it is only possible to claim deductions on interest from investment property loans. You cannot claim it on any other type of property you own for personal reasons, and you must be able to show that the property loans you are claiming deductions on have funded investment properties.

Make sure that you keep loan statements, so you have evidence to support your deductions. An accountant will not be able to effectively claim money off your taxes for you if you have no evidence to verify the validity of your claims. Tax fraud is a big problem, so evidence is always needed.

Damages and Repairs

It is also possible to get damage and repair costs deducted from your taxes. As stated above, you need to keep meticulous records. This is so that you can prove that repairs and maintenance have gone ahead.

Remember that if you claim expenses you have not paid, or you overclaim, you could end up getting into a lot of trouble. There is a very real chance that you could receive fines, penalties, and even court summons for fraudulent tax deduction claims.

Property Management Fees

Any property management fees incurred can also be claimed back as business tax deductions. Advertising costs can also be deducted, too. With that said, it’s usually realtors that handle advertising, so you will need to keep a record of any advertising costs they have incurred, and ask them for receipts and invoices.

Both digital and in-person management fees can be reimbursed back to you or deducted from your taxes at the end of the year, so keep records of any costs you have paid towards management. This will make filing your tax deductions at the end of the year considerably easier. Centralize everything in an accounting program if you are able to.

Review Travel Expenses

A lot of businesspeople think they can only claim tax deductions for things directly related to the management of their business, i.e., maintenance and repairs on property investments, but this is not true. You can also claim back money on travel expenses.

If you travel a lot to client meetings or to view properties, keep records of how much fuel you put in your car. This will allow you to save a lot of money on your taxes. You can also claim back any expenses as it relates to lunch, meals, Wi-Fi in your office, or even computer purchases.

File Insurance Costs

Any insurance premiums you have paid as a landlord are tax-deductible. Not all insurance costs are, however. It is important to get in touch with a professional to find out what expenses you can claim back as it relates to your insurance.

Make sure you get in touch with your insurance provider and ask for an annual statement before you do this, so your accountant is able to get a better understanding of how much you are trying to claim, and what the likelihood of any claims being accepted is.

Claim Back Legal Fees

Legal fees can also be claimed back. This means that any money you have paid to accountants or lawyers for business-related matters can be claimed back, except money you have paid accountants or lawyers to give you advice about property investments you want to make, not ones you have already made.

Always get receipts from any professional services you work with. Payments that appear on your bank statement are not usually sufficient for tax deductions–you need invoices or receipts that prove beyond a reasonable doubt that any tax deductions you are making are genuine.

Hire Professional Support

Throughout this post, reference has been made to the undeniable fact that you need a professional’s support. A professional legal advisor will be able to help you with all tax deductions and bring down the amount you have to pay at the end of the year.

In order to find an accountant or professional to help you, prioritize quality above everything else. The professional you hire needs to have good reviews, lots of experience, and extensive knowledge of tax deductions. An accountant or lawyer’s reviews will tell you everything you need to know about them, so make sure that you read them.

Nobody wants to pay their taxes. Taxes often seem unnecessary and excessive. However, by properly preparing, you can bring your tax bill down with deductions. The guidance given here will help you to get a better understanding of what deductions you can make. Get in touch with a professional today for further advice.