Friday, October 13, 2006


IRS and Landlords

I am back to posting. I had a baby in July so I had to take a little break.

My new topic is the federal tax benefits of owning rental properties. Trust me you are going to need to hire an accountant for this, or the cheap will quickly turn expensive. First you have to count the rent you receive as income, but the good news is you get depreciation. The building itself gets depreciated over approximately 30 years, which leads to a nice write-off. Especially if you are self-employed like me. You also get to depreciate improvements to the property. Here is where things can get a little confusing. Improvements like a new kitchen or windows get deprecated over time, similar to the building, but repairs you can take up front. It can be hard to figure out what is a repair and what is an improvement, so once again, hire an accountant! You can also write-off expenses like light bulbs, cleaning supplies and common area utlitiles. If you have to pay for the water for the whole building, common in Chicago, that is also an expense. The end of the year will go smoothly if you keep track of your expenses and income as you go. Don't try to figure it all out at the end of the year, it is a real pain. Buy some computer software or keep track in a log book or ledger. You life will be much better come January.

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