One of the main benefits of real estate investment are tax deductions for your investment properties. Carefully itemizing your deductions can significantly increase your ROI and can take a rental
property from the red to the black. With everything you are able to deduct (your mortgage and interest,
property taxes, maintenance/repair costs, attorney fees, and more), it can make the tax filing process
quite daunting. Using a property management company makes your tax preparation easier, not harder.
Here’s how.
There are a lot of tax forms related to real estate investment. For example, you are required to
send a 1099-NEC to each unincorporated independent contractor you used during the year, if you paid
them at least $600. That can make for a lot of 1099’s, especially if you own several rental properties and
shop around for your vendors. If you want to claim the deduction of those expenses on your taxes, you
need to provide the independent contractor the correct tax forms. Did you get all of their information
necessary to complete the 1099? It’s no fun going back in January trying to find an independent
contractor you used the previous April, who may or may not still be in business, then creating and
sending them the correct 1099. Property managers are required to handle all of this for you, so you
don’t have to spend time worrying about providing tax forms to people you paid to work on your
rentals.
The starting point for your own real estate investment taxes is your rental income. From there,
you can deduct expenses related to your investments, reducing the amount of taxes you may owe. This
is where it gets complicated because knowing whether an expense can be deducted—and how to
deduct it—is hidden in the tax code. You don’t want to miss possible deductions, and you certainly don’t
want to try to deduct an expense that the IRS says cannot be deducted. Hiring a tax professional when
things get complicated is always a good idea. Fortunately, using a property management company
simplifies the process. Property management companies provide you a 1099-MISC, which will tell you
exactly how much rent they collected on your behalf for that tax year. At Brick & Vine, we also provide
you monthly statements showing you exactly how much you have spent maintaining your properties, so
finding the deductions is as simple as reviewing your year-end statement.
Still have questions? Still scared of taxes related to your real estate investments? As a client of
Brick & Vine, you have access to The McClellan Law Firm, which will answer questions related to your
investment property, free of charge. We won’t do your taxes for you, but we will help where possible.
Taxes don’t have to be stressful. Partnering with Brick & Vine and The McClellan Law Firm will
make the process a lot easier.
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