A few tax deductions you can claim after investing in real estate

By: navjeet kaur

Besides offering you financial stability, real estate investment comes with certain tax benefits. Since you cannot escape from paying property tax, as it is necessary in order to comply with the legal rules, qualifying for tax deductions is beneficial. It helps you save some money. There are many cases where you can easily claim for tax deductions and qualifying for it is easy, provided your claim is valid and you have a proof for it. Below mentioned are a few tax deductions you can apply for.

Getting deductions in the interest is probably one of the biggest tax benefits of real estate investment. The interest you pay through installments for your mortgage is subject to deductions. Besides this, in case you used your credit card for purchasing the material or paying the labor required for repair of your rental property, the interest you pay on that purchase is also tax deductible. In addition to interest, the amount you spend on repairs is also subject to tax deductions, provided these repairs are necessary and ordinary. You can claim tax deductions while filing tax return for that year in which the repairs were done.

You might have travelled away from your property for various purposes like getting the material for the repair, travelling to look for the work performed by your contractors etc. The cost incurred in travelling to and fro from the location of your rental property is also deductible. Moreover, in case the property in which you invested is in some other state, the cost incurred in travelling a long distance is also tax deductible. It includes expenses like accommodation, food, travelling. However, before filing the claim you need to be sure of having a proof of actually travelling to that place and owning a property there.

In an unfortunate event, if your rental property is damaged because of any natural calamity like earthquake, flood, tornado etc, the loss experienced by you, generally known as casualty loss, is subjected to tax deductions. However, you might not be able to deduct the entire cost of property damaged; it depends on the severity of damage and whether or not your property is covered by the insurance. Besides this, the insurance premiums you pay for coverage like flood, fire, theft and other liability issues are deductible. It means besides getting protection for your property through an insurance policy, you can also avail benefit from it in the form of tax deductions.

You might have hired professionals for availing various services like getting an attorney, property management etc. This involves money as you have to pay them for their service. However, the money spent in paying them is tax deductible as long as these services are related to rental property. In addition to this, any money you spent on a rental activity can be claimed for tax deductions no matter whether it is paid to an employee or an independent contractor.

Therefore, tax deductions give you another good reason to invest in real estate. However, have a clear understanding of your investment to maximize your tax deductions.

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