Most Overlooked Real Estate Write Offs for Tax Season
Tax season is coming to an end, and it is probably going to be one of the worst times of the year for almost everyone. If you are looking to keep your head above water in the last few weeks of tax season, or you just want to know if you are getting all of the money to which you deserve, you have to do some serious research about the deductions and write-offs that really add up over time.
Without the help of a tax team and a real estate professional that will work with you to understand your tax deductions, you will leave thousands of dollars with the IRS. For example, every single dollar you deduct from your taxes will save you nearly 50 cents in taxes – think about how quickly that will add up! There is a lot of fine print and a lot to learn, but with the right resources, you just have to have faith in them. Most real estate professionals can talk to you about who to trust with your taxes.
Here are a few sources for you to look over to fully understand the tax code:
Internal Revenue Code Section 162
Internal Revenue Code Section 179
What Can I Deduct from my Real Estate Investments?
There are many possible tax deductions for real estate professionals and investors. Anything can be deducted if it is directly related to your business, ordinary and necessary, and a reasonable amount. The IRS Code Section 162 can help you there. You do have to be careful because there are some things you cannot deduct. For example, if you have a computer for work you can use that as a deduction, but only if you use it for work only – you can’t even use it to pay bills or watch Netflix. For some things, like a cell phone, you can break down the bill into percentages so that you only claim the portion of your bill that actually qualifies as a business expense.
Note that there isn’t a limit to how much you can deduct, but it can get you into trouble and cause scrutiny of your finances if things don’t look like they are headed in the right direction. It is always best to keep that scrutiny away from you.
Overlooked Deductions
Here are some of the items that people forget to deduct:
- Advertising expenses like mailing lists, newspaper ads, online advertising, promotional materials, and sponsored social media posts.
- Business gifts (up to $25)
- Legal fees
- Accounting fees
- Bookkeeping fees
- Uber, Lyft, or cab fares for travel
- Business meals (check percentages)
- Driving expenses, including insurance, mileage, tolls, and parking expenses
- Business travel costs
- Cell phone
- Software/hardware
- Computer
- Construction materials
- Educational materials
- Home office expenses (check qualifications)
- Insurances
- Interest on loans
- Office Equipment
- Postage
- Rental fees
- Retirement plan contributions
- Professional development materials and journals
- Professional dues and fees
- Business conventions, including transportation, lodging, food, and necessities
This is just the tip of the iceberg! Make sure that you pay attention to these details in the coming years and ensure that you get your money back and work with your tax professional to be sure you stay out of trouble.