As you know, I invest in multifamily properties.

Because I’m a long-distance investor, my investments involve travel.

You might think that since you’re not a long-distance investor like me that you don’t travel, but you’d be wrong. And guess what? The local travel you do to look at properties, manage properties or meet workers at properties are all deductible expenses! (I’ll get to that in a minute.)

But that’s just one deduction… one “write-off” you can take when doing your taxes. That’s what I cover quickly in the following video:

 

Here are some deductions I get to take…

Let’s dive a little deeper into some of the deductions I take come tax time year after year.

The first is travel.

I covered this briefly at the beginning of this article, but you need to know a bit more about what you can take as a deduction when it comes to travel.

First, as I mentioned a few times before, I am a long-distance investor. That means I live and work in Barcelona. For me that means a couple of trips to the United States, specifically North Carolina, each year. These trips are fully tax-deductible.

Before I go further, I have to give you the common disclaimer that I am NOT a tax professional. You need consult yours when filing your taxes. This article is for the purpose of sharing with you which deductions I typically take.

Now that I’ve given you my disclaimer, let’s move on.

When you are a long-distance investor like me, you can take two types of travel deductions:

  1. The flight costs to get to and from the states where my properties are located. This includes anyone involved who travels with me.
  2. Rental car expenses, accommodations that you have to pay for while you are dealing with your properties and dining expenses. While these may not be 100% deductible, you can usually take a percentage.

When you are not a long-distance investor, you still have travel expenses. For example, you can take a gas deduction OR a mileage deduction that you track for the sole purpose of looking at potential properties and managing current properties. If you meet your broker or other professionals you use to facilitate these activities and happen to have coffee, lunches or dinners related to these activities, these can be deductible. Again, not likely 100% deductible, and here’s where you will consult your tax professional.

Just be sure to keep really good records and save all your receipts.  Organization is key when keeping track of your real estate investing business-related expenses. (This is a business thing; not a hobby.)  – Tweet  

What other deductions can you take?

Beyond travel and travel-related write offs there are others. Again, this is from my personal and professional life. Yours may vary. But here are deductions I take beyond travel:

Home office expenses

You can take a portion of your home as a deduction if you use that space as your home office. Some people have an entire room dedicated as their office while others use a portion of the home. Whether that’s a corner in your garage, bedroom or living room doesn’t matter. If that is where you conduct your business affairs then that is your home office. Plus all the gadgets, paper and other things you need to conduct business are tax-deductible. At least partially. That typically includes your phone and Internet. (Ask your tax person.)

Away office expenses

If you have an office that’s not in your home, you are paying rent on a space, which may be fully tax-deductible. You also have paper, ink, computer(s), iPad, pens, pencils, more paper, file folders, office furniture and a whole lot more.  Keep receipts to prove you purchased these items for your business. Also, some items are depreciable over time.  – Tweet   For example, your computer and your office furniture are worth less today than when you purchased them. That means their value depreciates over time. The IRS provides you a number of years per item over which you can claim that depreciation. Ask your tax professional to explain this to you.

Employee-related expenses

If you have employees, you have expenses that are deductible. Most of my readers aren’t at that level quite yet, and I’m not a tax professional, so I won’t go into it too deeply, but if you pay people to work for you there are related deductions. I’m talking about W2 workers in the U.S. and even W9 workers in some cases.  It’s best to talk to your tax guy or gal so you can fully leverage those deductions.  – Tweet  

Insurance

When you have rental properties, you should have insurance. Not just because it’s a tax-deductible expense, but because someone can be injured on your property or your property can experience.

Maintenance expenses

When something breaks on your rental property, you have to fix it. That is a deductible expense. What if you have to pay someone to fix the problem? What you pay that person is deductible. If you have to purchase the parts to have something fixed or if you have to reimburse a worker for parts he/she bought to get the job done right, those are tax-deductible expenses. Even paint and a painter are tax-deductible expenses. After all, you have to paint in between tenants, and you have to keep the exterior paint looking good if you want higher rents. There will always be ongoing maintenance expenses. The good news is that you get to write them off on your taxes!

Legal and professional services

One of the line items we look at in my business, we may use legal and/or a professional to help us decide a few things. If I’ve paid a professional, that payment is tax-deductible. The write-off can be substantial. For me, I pay TWO legal teams… one in Barcelona and another on U.S. soil. I have to because I want all my deals to run smoothly!

Interest payments

Regardless of whether you use a traditional bank or private lender, you will have interest payments to these entities. The interest on a loan is absolutely tax-deductible. Take that deduction! If you wonder what I mean by “interest payments,” it is simply what I agree to pay a lender to let me use his/her money (or the bank’s money). For easy math, let’s say you agree to pay a private lender 10% on $50,000. Every year, whether you pay every month or every quarter, the total interest paid will equal $5000. That $5000 is what you will claim on your taxes. That is not the same as an equity investor, and because I get that question all the time, I’m working on a video about the differences! Look for it soon.

Depreciation on your property

This may well be one of the most powerful deductions on your rental real estate! There are line items and overall depreciation. A line item might be the countertops or flooring. Or it could be the door knobs you choose to use.  Each item you use to upgrade your rental property has its own depreciation schedule. In other words, it will depreciate over a given period of time at a given rate of depreciation.  – Tweet   Ask your tax professional about all the great depreciable items you have in your rental property. And be sure he/she takes the right amount of overall depreciation in your property. In the U.S., residential real estate depreciates over a period of 27.5 years; commercial property depreciates over 39 years.

There are more deductions you can take legally, but once again I am not a tax professional. I strongly advise you to do some research on deductions you can take related to your business… in the state and/or country in which you conduct that business. Then take your questions to your favorite tax professional. Make sure that individual has a lot of experience assisting people who invest in real estate as an income-producing venture.

You may wonder why I’m sharing all my information with you about this and other topics when it comes to running your real estate investing business. Simple. I wish someone had tutored me in all this stuff when I started out. It would have saved me a great deal of time and money! Just promise me that you’ll use the information I share with you and we’ll be square.

 

Now… if you’ve been reading my most recent articles and watching my videos, you know I’ll leave you with a question when I can. Today’s is…

Of these different deductions I’ve just shared with you, which of them has you tax professional NOT talked to you about? Further, are any of these new to you, because you hadn’t heard of them before?

If you like information like this, don’t stop at this article. Go all the way back to the beginning of my blog and read all the articles. Connect with me on all my social media channels and be sure to watch all my YouTube videos. If you haven’t subscribed, by all means, please do!

Finally, sign up for my FREE MASTERMIND. I’ll be going into depth in how I find, fund and facilitate my multifamily properties. There is no selling. I’m just sharing my knowledge. You won’t get a big upsell at the end of the mastermind either.

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