Tax Benefits for Real Estate Investors

Hollis, NH Potential Investor Looks for Tax Advice

Real estate is a great way to diversify your investments, generating a steady flow of passive income.
There are also many tax benefits to real estate investing, including writing off maintenance expenses
done on the property, property taxes, insurance, mortgage interest, and even property management
fees. These deductions can significantly reduce the taxable income generated from rental properties.
You are also able to take advantage of depreciation. This can be deducted each year, taking into
consideration how much the property is worth, the time period, and a designated depreciation method
that will be used.

A Hollis resident was considering investing in real estate to use as rental properties. Wondering how
this would affect her taxes, she contacted the team at Merrimack Tax Associates for advice.

Tax Deduction for Rental Properties

There are plenty of deductions available for rental properties, these include the obvious expenses to
maintain and repair the property, taxes, insurance, and mortgage interest. You can also deduct any
property management fees paid to a third party. Business expenses that are used toward operating the
rental property, including advertising for a vacancy, business equipment (computer, office supplies,
business cards), travel, and legal and accounting fees can also be deducted. These expenses can add up,
making a dent in the amount of income from your rental properties that will be taxed.

Real Estate Investing Allows for Self-Employment Without the FICA Tax

Individuals who are self-employed are required to pay both the employer and the employee FICA tax.
However, if you have invested in real estate and are earning income through this, it is not considered
earned income. This means that you are not required to pay the FICA tax on this rental income. This
advantage alone can save you a lot in taxes.

There are plenty of tax advantages associated with investing in real estate. The Hollis resident was
pleased to learn about the deductions that would be available if she opted to move forward with these
investments. Thanks to the team at Merrimack Tax Associates, she now has a better idea of what to
expect from this additional income when it comes time to file her taxes.