5 Tax Mistakes to Avoid When Buying Investment Property

by admin on August 27, 2010

Here are some of the best tax tips highlighted during last years How to Profit from Foreclosure event. This year’s event will build on the information from last year. For a more advanced look at real estate investing attend the “How to Profit from Foreclosure and Other Real Estate Investments” event in Atlanta, October 2, 2010.

5 Tax Mistakes to Avoid When Buying Investment Property

1.  You make your money on an investment property on its  purchase (the whole buy low, sell high idea); if you shop around enough, you can find a distressed property with redeeming features that will allow for a good sale price. Make sure you invest in a property that will garner you a profit upon its sale.

2.  Repairs on a rental property are deductible in the year performed  which is good news for your  taxes. Fixing a leaky faucet is a repair, deduct it! Painting is a maintenance item, also fully deductible in year performed. In short, putting the work into maintaining and improving your investment property might not be as expensive as you think and will have big payoffs in the long run.

3.  Improvements on a rental property must be amortized over the life of the property or per IRS Regulations. A new roof on an old structure must be written off over 27.5 years.  A new AC Unit must be written off over its estimated useful life.

4.  Get professional help when setting up properties for tax purposes. Remember that the IRS code states that Depreciation must be taken into account when the property is sold, whether taken or available to be taken.  If the property owner omitted depreciation, they paid too much tax every year and then they had to recapture this depreciation that they never got the benefit of, and had to pay tax on the recapture. Use an expert to sidestep hidden costs.

5.  Couples making up to $100K can take up to $25,000 in rental losses per year if they were active in this passive activity. Prorated from $100K ($25,000) to $150K ( $0.00). You won’t receive any rental losses if the taxpayer and spouse file “Married Filing Separately” and live together at any time during the year. Suspended losses can be taken in the year of sale to reduce the gain.

Bill Nemeth, EA, the President of the Georgia Association of Enrolled Agents, will be speaking at the October 2, 2010, “How to Profit from Foreclosure and Other Real Estate Investments.” Make sure you buy your tickets now.

His colleague Merry Brodie, a CPA and enrolled agent, will also be speaking. The Georgia Association of Enrolled Agents is  a sponsor of the “How to Profit from Foreclosure and Other Real Estate Investments” event.

For more tax tips from Bill and Merry read this CBS Moneywatch article.

Buy your full-price tickets now for 50% off.


Save $45 on the VIP ticket, which includes the Podcast of the event and a special investing eBook package.

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