6 posts tagged depreciation deductions

The most significant advantage of investing in real estate is the ability to pay almost ZERO TAXES on the rental income you earn.  I briefly mentioned this in an earlier post about 10 advantages of investing in real estate instead of stocks.  I want to elaborate a little bit more on the tax advantages

Is it true? People sometimes tell me that they’ve been told it’s no good to buy cash flow positive properties because you miss out on all the tax deductions. Perhaps you’ve heard this too? You might be wondering “Is that true”? Well, depending on the age of the property, your depreciation deductions will be lower when you buy an older property.

Depreciation - Useful Life, or Economic Life February 11th, 2008 Depreciation is the definition in accounting for a reasonable estimate, in monetary terms for the devaluation of an asset over a period in time. Since most assets are capitalized on the balance sheet, in financial statements, the “cost of depreciation”, is provided as an expense on the income statement.

Depreciation is sadly often missed by investors, but it is a legitimate tax deduction. The Tax office admits that 52% of investors don’t claim what they are legally entitled to. Don’t let it happen to you! There is no cash outlay required to legitimately claim a tax deduction, and you can claim depreciation even if you are making a profit after expenses from your investment.

Deducting expenses on your taxes is straight-forward in many circumstances. For instance, if you pay advertising costs for your business, simply total the receipts and list the figure under advertising on your Schedule C. If, however, you are depreciating or expensing an item, which you don’t use 100% for business purposes, you will need to find your business percentage.

The absence of a bright line in determining whether expenditures are deductible or must be capitalized to the asset that they are incurred has existed for decades. The Treasury Department and IRS have announced that they intend to issue proposed regulations (REG-125638-01 notice) addressing the