Every Landlord's Tax Deduction Guide

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The only book on tax deductions specifically for residential landlords!

Named a "Top 10 Real Estate Book" by Robert Bruss, syndicated real estate columnist

If you own rental property, you should be taking advantage of the many tax write-offs available. Every Landlord's Tax Deduction Guide gives residential landlords the plain-English guide they need to save money on taxes — ...

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The only book on tax deductions specifically for residential landlords!

Named a "Top 10 Real Estate Book" by Robert Bruss, syndicated real estate columnist

If you own rental property, you should be taking advantage of the many tax write-offs available. Every Landlord's Tax Deduction Guide gives residential landlords the plain-English guide they need to save money on taxes — without the services of a pricey accounting firm.

This book explains how to maximize your deductions without drawing the ire of the IRS. Find out how to:

  • fill out IRS Schedule E
  • take real estate tax credits
  • figure out if an expense is a repair (deductible) or an improvement (depreciable)
  • maximize your depreciation deductions
  • deduct losses arising from real estate ownership
  • keep proper tax records
  • deduct home office, travel, and casualty losses

Every Landlord's Tax Deduction Guide is comprehensive yet easy to read and provides interesting real-world examples. This edition is completely updated for 2012 returns and reflects the latest tax information and numbers.

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Editorial Reviews

Los Angeles Times
This book cannot be recommended too highly.... explains rental property tax deductions clearly and details how to maximize tax benefits by using 'hidden deductions'...
The Washington Post
This unusual book makes tax tactics actually interesting, whether you are a novice or a serious full-time investor.
From the Publisher
"There should be a law requiring every landlord to read this great book. It simplifies the complicated, makes boring tax laws interesting, and offers landlords the major financial incentive of saving tax dollars.... On my scale of one to 10, this outstanding book rates an off-the-chart 12." - Bob Bruss, nationally syndicated columnist
Los Angeles Times
This book cannot be recommended too highly.... explains rental property tax deductions clearly and details how to maximize tax benefits by using 'hidden deductions'...
The Washington Post
This unusual book makes tax tactics actually interesting, whether you are a novice or a serious full-time investor.
Boston Globe
Uses many lively examples and charts to make potentially boring topics understandable and interesting.
Accounting Today
Everything a building owner could hope to know on the subject.
California Bookwatch
Maximize profits and stay legal: keep Every Landlord's Tax Deductions Guide's latest edition on your desk.
Chicago Tribune
The best of the best.... heavily emphasizes maximizing depreciation deductions.
Real Estate Matters
The best part of the book is that it's written in a way that will make the most sense to investors.
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Product Details

  • ISBN-13: 9781413310634
  • Publisher: NOLO
  • Publication date: 12/7/2009
  • Edition description: 6th Edition
  • Edition number: 6
  • Pages: 520
  • Product dimensions: 7.00 (w) x 8.90 (h) x 1.20 (d)

Meet the Author

Stephen Fishman is the author of many Nolo books, most recently Tax Deductions for Professionals. Other titles include Deduct It! Lower Your Small Business Taxes, Every Landlord's Tax Deduction Guide and Home Business Tax Deductions: Keep What You Earn—plus many other legal and business books. He received his law degree from the University of Southern California in 1979. After time in government and private practice, he became a full-time legal writer in 1983.

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Read an Excerpt

The tax code is full of deductions for landlords. Before you can start taking advantage of these deductions, however, you need a basic understanding of how landlords pay taxes and how tax deductions work. This chapter gives you all the information you need to get started, including:

  • how the IRS taxes landlords

  • how tax deductions work

  • how forms of property ownership affect landlord taxes, and

  • IRS audits -- how they work and how to avoid them.

How Landlords Are Taxed

When you own residential rental property, you are required to pay the following taxes:

  • income taxes on rental income and profits from property sales

  • property taxes, and

  • Social Security and Medicare taxes (for some landlords).

Let's look at each type of tax.

Income Taxes on Rental Income

You must pay federal income taxes on the income (rent and other money) you receive from your rental property each year. When you file your yearly tax return, you add your rental income to your other income for the year, such as salary income from a job, interest on savings, and investment income.

This book covers rental property deductions for federal income taxes. However, 43 states also have income taxes. State income tax laws generally track federal tax law, but there are some exceptions. The states without income taxes are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. For details on your state's income tax law, visit your state tax agency's website, or contact your local state tax office. You can find links to all 50state tax agency websites at www.taxsites.com/state.html.

Income Taxes on Profits When You Sell Your Property

When you sell your property, any profit you earn is added to your income for the year and is subject to taxation. Profits from the sale of rental property owned for more than one year are taxed at capital gains rates. These rates are generally lower than income tax rates -- usually 20% lower, except for taxpayers in the lowest tax brackets. (See Chapter 5 for an example of the tax effects of a rental property sale.)

However, you may be able to defer tax on your profits -- perhaps indefinitely -- by selling your property through a like-kind exchange (also called a section 1031 exchange or tax-free exchange). This kind of exchange involves swapping your property for similar property owned by someone else. These property swaps are subject to complex tax rules that are beyond the scope of this book, since they have nothing to do with income tax deductions. For more information, see IRS Publication 544, Sales and Other Disposition of Assets.

Social Security and Medicare Taxes

Everyone who works as an employee or who owns his or her own business must pay Social Security and Medicare taxes. These are two separate taxes:

  • a 12.4% social security tax, up to an annual income ceiling or cap -- in 2006, the cap was $94,200 per year, and

  • a 2.9% Medicare tax on all employee wages or self-employment profits.

Together, these amount to a 15.3% tax, up to the annual Social Security tax ceiling. Employees pay half of these taxes themselves and their employers pay the other half. Self-employed people must pay it all themselves.

You may have to pay (and withhold) Social Security and Medicare taxes if you hire employees to work in your rental activity -- for example, if you hire a resident manager. The employer's share of such taxes is a deductible expense. (See Chapter 12.)

Fortunately, the income you earn from your rental property is not subject to Social Security and Medicare taxes. (IRC sec. 1402(a)(1).) This is so even if your rental activities constitute a business for tax purposes. (See Chapter 2.) This is one of the great tax benefits of owning rental property. A person who owns a hot dog stand must pay the 15.3% self-employment tax on his or her annual profits, whereas a person who owns a rental house or other real estate need pay no self-employment taxes on his or her rental income.

There is one exception to this rule, which will not apply to many readers of this book: you must pay Social Security and Medicare taxes on rental income if you provide "substantial services" along with the rental. This exception would apply, for example, if you owned a boardinghouse, hotel, or motel and provided maid service, room service, or concierge services. The exception does not apply to services commonly provided for residential rentals, such as repairs, cleaning, maintenance, trash removal, elevators, security, or cable television.

In addition, if you qualify as a real estate dealer, you'll have to pay Social Security and Medicare taxes on your annual profits. (See Chapter 2.)

Property Taxes

Property owners in all states pay property taxes imposed by cities, counties, and other local governments. They are a tax on the value of your rental property. Property taxes are not covered in this book.
How Income Tax Deductions Work
The tax law recognizes that you must spend money on your rental properties for such things as mortgage interest, repairs, maintenance, and many other expenses. The law allows you to subtract these expenses, plus an amount for the depreciation of your property, from your effective gross rental income (all the money actually earned from the property) to determine your "taxable income." You pay income tax only on your taxable income, if any. Expenses you can deduct from your income are called tax deductions or tax write-offs. These deductions are what this book is about.

Although some tax deduction calculations can get a bit complicated, the basic math is simple: The entire tax regimen for rental real estate can be reduced to the following simple equation:

Effective Gross Rental Income
minus Operating Expenses (including mortgage interest)
minus Depreciation and Amortization Expenses
= Taxable Income

(People who analyze real estate investments don't include mortgage interest as a real estate operating expense, but it is an operating expense for tax purposes.)

EXAMPLE: Karen owns a rental house. This year, her effective gross rental income (all the income she actually earned from the property) was $10,000. She doesn't pay tax on the entire $10,000 because she had the following expenses -- $5,000 in mortgage interest, $1,000 for other operating expenses, and $2,000 for depreciation. She gets to deduct these as outlined in the above equation:
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Table of Contents

1. Your Tax Deduction Companion for Landlords
2. Tax Deduction Basics for Landlords
3. Landlord Tax Classifications
4. Deducting Your Operating Expenses
5. Repairs
6. Depreciation Basics
7. Maximizing Your Depreciation Deductions
8. Interest
9. Start-Up Expenses
10. The Home Office Deduction
11. Car and Local Transportation Expenses
12. Travel Expenses
13. Hiring Help
14. Casualty and Theft Losses
15. Additional Deductions
16. Vacation Homes
17. Deducting Rental Losses
18. Record Keeping and Accounting
19. All About Schedule E
20. Claiming Tax Deductions for Prior Years
21. Help Beyond This Book

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Customer Reviews

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Sort by: Showing all of 2 Customer Reviews
  • Posted May 6, 2011

    more from this reviewer

    A valuable book that every landlord should have!

    As a legal writer and an attorney with experience in government and private practice, Stephen Fishman has authored many legal books, including "Every Landlord's Tax Deduction Guide." "Every Landlord's Tax Deduction Guide" is a very comprehensive book, covers subjects such as tax deduction basics, landlord tax classifications, operating expense, repairs, depreciation, interest, star-up expenses, home office deduction, car and local expenses, travel expenses, hiring help, casualty and theft losses, vacation homes, rental loss, record keeping and accounting, schedule E, claiming tax deduction for prior years, and additional resources. "Every Landlord's Tax Deduction Guide" is also a very detailed book. For example, most landlords know about home office deduction, but they may not know that you can use either the Square Footage Method (excluding the common area) or Room Method to claim the home office deduction. You can choose the method that is best for you, the landlord and tax payer, and it is legal. In the example cited in the book, the difference can be between 12.5% (or 14% when excluding the common area) and 16.7% for home office percentage. In this case, knowledge is power, and it empowers you to save money by claiming a bigger share of the home office deduction if you know how. "Every Landlord's Tax Deduction Guide" has 548 pages. It is a valuable book that every landlord should have! Gang Chen, AIA, LEED AP BD+C, Author of "LEED GA Exam Guide," "Architectural Practice Simplified," "Planting Design Illustrated," and other books on various LEED exams, Scribus, architecture, and landscape architecture

    2 out of 2 people found this review helpful.

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    Posted January 23, 2014

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