Rental Property: Know What’s Deductible
Being a landlord can have its share of problems. Pipes break. Tenants move out. So it’s good to know there are some perks — like being able to deduct certain expenses from your total rental income for tax purposes.
If you own residential rental property, such as a house or apartment, you may be entitled to the following deductions.
Around the House
You can deduct the interest you pay on a mortgage or home equity line of credit. You can also deduct real estate taxes on your rental property. Fire, theft, flood, and liability insurance premiums, as well as wages paid to any employees you have in connection with the rental activity, also are deductible.
As It Ages
You can begin claiming depreciation deductions on your rental property in the year that you place it in service (generally, the year you start renting it out) to help recoup some of your acquisition and improvement expenses.
Fixing It Up
Repairs that keep the property in good condition but don’t increase its value are also potentially deductible.
Getting Professional Help
Fees paid to attorneys, accountants, and other professionals are deductible if they’re paid for work related to your rental activity.
Paying a Visit
Travel expenses are deductible when the main purpose of your visit is to collect rental income or to manage and maintain your rental property.
Settling Your Estate
An estate plan is essentially a plan to distribute your assets when you die. And your will is the cornerstone of that plan.
But other factors can still influence how your assets are distributed. Consider how the following might come into play.
Validating Your Will
If you have a small estate, distributing your assets according to the instructions in your will may be relatively simple, with little court supervision. However, settling a large estate typically involves formal probate, a process through which a court supervises asset distribution. Probate can be slow and costly and expose your estate to public scrutiny.
Probate Exceptions
Some assets aren’t subject to probate. These include life insurance death benefits payable to a designated beneficiary and assets held in joint tenancy with the right of survivorship.
Assets that are jointly owned with a right of survivorship pass automatically to the surviving owner when one owner dies. Any two individuals can use this form of ownership, although it’s commonly used by spouses.
You may have been seeing bigger paychecks over
the last several months. The reason: the 2010
Tax Relief Act temporarily reduced the employee
share of the Social Security tax rate for employees
by two percentage points (for 2011 only).
