Having a rental property is a great way of earning and building wealth in the real estate industry. It is your assurance of income received every month. Owning a rental property has tax advantages unknown to most.

What these tax advantages are, find out below:

1. Tax deductions on a rental property are in line with taxes in any business. Expenses necessary for maintenance of the property can be deducted. This includes insurance, cleaning, landscaping, mortgage payments interest among others. Advertising costs, tenant finder fees and professional fees are also included.
2. Loan payments on your rental property are tax deductible. This strategy eliminates the profit on your rental business. The equity you put into the insurance product grows tax-free.
3. If your real estate investment appreciates, a tax-related benefit is that its appreciation is not taxed. If you purchase a home for one-hundred thousand dollars and it doubles to two-hundred thousand, the one-hundred thousand you gain is not taxed currently. The combination of borrowing and appreciation is still tax-free. Let’s say you buy a property for one-hundred thousand dollars and appreciates to two-hundred thousand, once you borrow two-hundred thousand against the value of the property, that amount you borrowed will not be taxed.
4. Another rental property tax benefit you could enjoy is the deductible business expenses. If your business mainly consists of real estate investment, you may qualify for what is known as Real Estate Professional. The benefit you can get from this is your real estate activities such as having a property or properties rented will not be considered as passive investments but as an active business, meaning you can deduct all ordinary operating expenses from your tax dues.
5. Phantom Cash is a government incentive and tax loophole to further benefit from the real estate business. In a Phantom Cash, the value of your rental building is divided by 27.5 years. You can then divide the amount from your yearly taxable income.

To better illustrate this, here is an example:

A building purchased at $40,000 divided by 27.5 = $1,455. This amount will be deducted from your taxable income per year. This excludes other deductions from your rental income.

6. Tax Deferred Form 1031 allows you to sell a property with the intention of purchasing a more expensive one and not having to pay the capital gains tax you received. The 1031 form uses a third party to hold the money until you can invest it into another property of higher value. This will allow you to upgrade your rental properties without having to pay taxes.

7. If you have rental losses such as tenants running off without their rents paid and other things, these accumulated losses will enable you to boost your finances. If you have thousands of losses, make sure that you claim every single penny of tax deductions they are entitled. Remember that every $1,000 expenses claim will give you $400 less your tax bill later on.

You can inquire from your local tax authorities on further information on the tax advantages of owning a rental property. Go ahead and invest and you will enjoy more benefits aside from the ones you can get from taxes.

Looking for a nice property to rent, you can find a wide variety of rental properties at Phoenix Homes for Rent and Seville Homes for Rent.