Rental property: A gateway for tax savings?

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The opportunity to get a deduction on income taxes is one of the most popular reasons why some people choose to invest in real estate. However, as many would later on find out, this particular benefit is not ensured with every purchase of investment real estate. An analysis of the property owner’s full tax situation is needed to determine if tax savings can indeed be obtained.

What should property owners be on the lookout for?

When filling up their IRS 1040 main tax form, rental property owners should take note of the calculations for their real estate rental property operations on the schedule E form, which will also flow to the 1040 form line 17.

Many taxpayers use deductions and losses to reduce their starting “gross income” to the lowest “taxable income” possible. On the Schedule E form, the property owner needs to list all the property’s income and also its expenses for the year. The expenses, which include costs of maintenance work, property taxes, mortgage interest, insurance, and the property’s depreciation, are subtracted from the property’s income.

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The tax deductions stem from the resulting value of the property, if the expenses exceed the total income. The net value counts as a loss and the result is a reduction of the owner’s personal income. This affects the entire 1040 form because it can reduce their taxable income.

Caveat: There are also several limitations in place to prevent wealthy people from taking advantage of the tax saving measures available to rental property owners. Finding out which of these apply to their situation needs the input of a tax professional. It is therefore recommended for property owners to avoid expecting tax deductions simply because they’ve invested on real estate and consult a tax professional to determine if there are other options available to them.

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Applegate Property Management offers property management and leasing services to residential and commercial property owners in Minnesota and Wisconsin. For more articles about real estate, visit this Facebook page.

Upgrading the value of investment property

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The value of property, when left alone, can change according to circumstances. This is why it is a good idea for property owners to manage their assets in order to increase the value of their investment. However, for those without time or resources for the task, expert property managers could intervene.

This is where the services of Applegate Property Management come in. The company’s agents handle various aspects of property management for commercial and residential property owners so that they can be assured of the full potential of their investment.

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The first step to furthering a property’s value is to see to its use or occupancy. Applegate has an aggressive marketing strategy to secure tenants and thoroughly screen them for qualifications such as financial stability and caretaking capabilities for the property. The company maintains positive relationships with tenants to ensure their satisfaction over their decision to rent the property.

Of course, the use of a property will result in some deterioration, which is why Applegate also carefully manages the maintenance and repair of the properties under its care. Using its connections with vendors and contractors, the property management company provides cost-effective and timely services that put both the owner and the tenant at ease.

To complete the package, Applegate also provides accounting services to its clients – from the creation of annual budgets to the preparation of monthly financial reports and compilation of the year end summaries for simplifying tax preparation.

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Applegate Property Management is committed to the success of the properties under its care. For more information about the company’s services, visit www.applegateproperties.com.