Owning rental property is a great way of making money. If you are a landlord, you can easily build equity in real estate by using your tenants’ rent to pay the mortgage on the property. And if you are rich enough to buy the property without a loan, owning rental properties can generate a substantial income. The biggest advantage of getting into the landlord business is the tax advantages of this activity.

Rental Property Tax Advantages

Rental property is considered a business unit when it comes to taxation of rental income. In other words, you are in business if you own rental property and are taxed like a regular business in many ways.

The rent you receive from your tenants is considered as your gross revenue. This revenue can also include unreturned deposits, rent advancements and expenses paid by a tenant.

You can deduct any expense that is necessary to manage and maintain the property just like you do in a business. This can include interest on mortgage payments, insurance, cleaning, landscaping etc. Expenses like the cost of advertising for tenants, professional fees, tenant finder fees, mileage driving to and from the property and depreciation can also be included because renting is treated just like a business.

One of the biggest advantages of rental property taxes is that you can manipulate your equity. That is while a rental property increases or decreases in value, you equity in the property is independent of this change.  The stagnant equity helps in obtaining incredible rental property tax advantages.

The loan payments on your rental property are completely tax deductible.

In a nutshell, the rental property tax advantages are many. The primary reason for this advantage is that the rental property is considered as a business. You can therefore, write-off practically all of your associated costs. As equity grows in the rental property, you can also convert the equity into a tax-free growth vehicle.

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