Spectrum Enterprises LLC
Aim to trim down your tax in a simplified manner
The cycle started when the tenants has dropped his/her money to the landlord for the rental payment. Now,
The landlord has a responsibility of paying back to the US government in a form of taxation but he actually thinks in many certain ways to reduce it as much as he/she wanted to.
Other landlords find a best solution in order to maximize their taxes as little as possible. The solution is always the same: Any legitimate expense you have can be used to reduce your taxable income and the amount of taxes you pay, if any.
The key is knowing where and how to deduct your expenses. There are three ways add expenses to your return. The first is to deduct your entire expense amount in the year that it was paid. For example you pay a landscaper $725 in 2009 you deduct the $725 on your 2009 return. The second is depreciation. If you spend $97’000 on a rental home in 2009 you have to break the cost over 27 ½ years (residential rental property). Amortization is the third way to claim your expenses. Amortization is similar to depreciation where you can’t take the full amount of an expense in one year and must deduct it over several years. Examples include start up expenses over a certain amount and points paid for obtaining a mortgage.
Landlords report their income and expenses on a Schedule E that is attached to their tax return. Unfortunately landlords are audited at a higher rate than the average tax payer. Many times the audit is triggered because an expense wasn’t deducted properly (using the methods above). Another reason they’re audited is because expenses are placed in an incorrect category or the description is too vague. Also, make sure if you have an expense that was used partially for personal reasons you only deduct the amount (based on percentage of use) that’s attributable to your business.
One of the best decisions a landlord can make is discussing her plans with a tax professional (specializing in real estate) and other team members. A knowledgeable professional can help you determine the best entity to use and how to guide your business toward the best tax classification (business owner, realty investor, realty dealer or not for profit).
By aiming to trim down the taxes in a simplified manner which could absolutely makes a difference in your cycle and your bottom line.
Augustus McMillan is the managing director of McMillan Consulting with offices in Baltimore, Atlanta and DC. He has been preparing taxes for others since 1997, with real estate being one of his specialties. He can be reached at 410-775-6226 begin_of_the_skype_highlighting 410-775-6226 end_of_the_skype_highlighting or ace at macadvises.com
Spectrum Enterprises, LLC was created by investors for investors. We
recognize the importance of maximizing cash flow and profitability in
your real estate endeavors in Baltimore, MD. Spectrum specializes in a
myriad of services, which consists of investments, consulting, sales and
property management. www.spectrum-ent.net
The landlord has a responsibility of paying back to the US government in a form of taxation but he actually thinks in many certain ways to reduce it as much as he/she wanted to.
Other landlords find a best solution in order to maximize their taxes as little as possible. The solution is always the same: Any legitimate expense you have can be used to reduce your taxable income and the amount of taxes you pay, if any.
The key is knowing where and how to deduct your expenses. There are three ways add expenses to your return. The first is to deduct your entire expense amount in the year that it was paid. For example you pay a landscaper $725 in 2009 you deduct the $725 on your 2009 return. The second is depreciation. If you spend $97’000 on a rental home in 2009 you have to break the cost over 27 ½ years (residential rental property). Amortization is the third way to claim your expenses. Amortization is similar to depreciation where you can’t take the full amount of an expense in one year and must deduct it over several years. Examples include start up expenses over a certain amount and points paid for obtaining a mortgage.
Landlords report their income and expenses on a Schedule E that is attached to their tax return. Unfortunately landlords are audited at a higher rate than the average tax payer. Many times the audit is triggered because an expense wasn’t deducted properly (using the methods above). Another reason they’re audited is because expenses are placed in an incorrect category or the description is too vague. Also, make sure if you have an expense that was used partially for personal reasons you only deduct the amount (based on percentage of use) that’s attributable to your business.
One of the best decisions a landlord can make is discussing her plans with a tax professional (specializing in real estate) and other team members. A knowledgeable professional can help you determine the best entity to use and how to guide your business toward the best tax classification (business owner, realty investor, realty dealer or not for profit).
By aiming to trim down the taxes in a simplified manner which could absolutely makes a difference in your cycle and your bottom line.
Augustus McMillan is the managing director of McMillan Consulting with offices in Baltimore, Atlanta and DC. He has been preparing taxes for others since 1997, with real estate being one of his specialties. He can be reached at 410-775-6226 begin_of_the_skype_highlighting 410-775-6226 end_of_the_skype_highlighting or ace at macadvises.com
Spectrum Enterprises, LLC was created by investors for investors. We
recognize the importance of maximizing cash flow and profitability in
your real estate endeavors in Baltimore, MD. Spectrum specializes in a
myriad of services, which consists of investments, consulting, sales and
property management. www.spectrum-ent.net
