Tax Savings for Investment Property

  
     
  By: James Steele  
 

Everyone knows that investment property is one of the best ways to build wealth over your lifetime. As with any small business, investment properties give you opportunities to save on taxes associated with that business. Let's take a look at how an investor can find tax savings that will help boost their income.

The most important thing when it comes to tracking your taxes and income on an investment property is keeping detailed records of every transaction for the individual property. This means you need to keep accurate and detailed notes that specify exactly where any bills are coming from, how they are being paid, and when they occur. By doing so, you and your accountant will be able to track which investments are earning money and which ones are not.

By keeping a detailed record of all of your transactions, you and your accountant will be able to decipher the best means to save on your taxes. For instance, many large improvements that need to be done for real estate investments, such as a new roof or new carpet, are a large capital expense that can be depreciated over five years. This depreciation process will allow you to keep more of your rental income profits each year, and it may be possible to choose an accelerated depreciation on some of the improvements to help you decrease your taxes even greater in the immediate time frame.

Aside from the day to day expenses, another way to drastically save on your tax bill is by doing a 1031 exchange every time you sell an investment property and go to buy another. These IRS approved tax-deferred methods allow you to sell your property and roll all of the profit into a new investment property without having to pay taxes on the profit. The rules for doing this are very detailed and you will want to make sure that you work with an experienced person when it comes to these transactions, but this is one of the best ways to save on your taxes.

As a business owner there are many opportunities open to you for saving on your yearly tax bill. Make sure to keep detailed notes on all of your transactions, find a good accountant that is up-to-date on the current laws, and take advantage of the opportunities the IRS has already established. By doing this you can greatly save on your business taxes and increase your wealth more quickly.
  
  Article Source: http://yourfinance.co.za   
     
 
About The Author
James provides information about the tenant in common 1031 exchange through his website on tax deferred 1031 exchanges.
 		  
     
 
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