When you rent out your property you will be getting money in the form of rent, which is an income source and just like getting profits from a business, rental income is subject to taxation. However, there are many ways through which you can reduce the amount of tax that you have to pay on such property. Here is a look at what these are so that you save money on tax expenses.

Expenses Incurred in seeking Tenants

When you decide to give your property on rent, you need to give adequate advertisements regarding the same. You may have to travel from one place to another for this purpose. Sometimes people fix an agent to get the job done. All such expenses incurred enjoy tax benefits.

Expenses incurred in travelling for Rental Property Requirements

When you rent out property you might have to undertake activities wherein you have to travel to places. For example, you might have to travel from one city to another for finding the right tenants or for speaking to them on any matter related to the house, repair jobs or any thing else. You can total all such travel expenses and use them for tax deductions on rental income.

Loan Payments

Loan taken on property that has been rented can be used to reduce tax payments. When you take out a loan, you would be paying a considerable amount of money towards loan repayment. This includes money spent on interest payments, mortgage insurance premiums, loan repayment for loan taken for property improvement, and much more. You can include all such amounts in tax deductions. 

Maintaining the Rental Property

As a property owner, you would definitely be incurring expenses for activities undertaken to maintain your property. You can use such expenses for tax deductions. Here is a look at what maintenance expenses you can include for deductions.

Repairs

From time to time you would be spending money to repair certain aspects of your home structure as they will get worn out due to weather elements or usage. If your tenant does not pay for such expenses, you can mention them to get tax deduction in the year in which they occurred.

Others

Maintenance activities are not limited to repairs. You may have to spend for activities like cleaning up property, doing the garden and landscape, paying fees for property management, take up services for disposing garbage and much more. All such maintenance expenses can be specified for tax deductions.

Depreciation

With time, as with any property, your rental property will depreciate in value. You can take up deductions on such depreciation based on its extent due to wear and tear. Depreciation is one factor for which you will not be spending any money from your pocket at all, yet you gain the benefit of tax deductions from it. Furthermore, if you have made any improvement on your property structure, these are also subject to depreciation and likewise can be mentioned for tax deductions.

Renting to Businesses

Those who have rented out their property to a business or some commercial interest, that is running a home office from the premises can gain tax deductions on such rental income for expenses such as interest on mortgage, insurance payments and much more.

Gain Tax Deductions on Property Losses

It may sound a bit strange, but the amount of money you pay for insurance on rented property can be used to enjoy tax benefits in the event of loss caused by flood, fire and other natural calamities.

In the event that you have to face tax losses as a result of your property, you can get deductions from such loses by showing your rental income.

Summary

As you can see from the above points, there are many ways to cut taxes on rented property, Make yourself aware of all these tax deduction routes and take advantage of them so that you can bring down tax payments considerably and enjoy more of your rented income every year.

 

Did you know that 60% of all real property owners are over assessed by their city?  And more disturbing, less than 2% of all tax payers appeal their property taxes?  Of the 2% that do actually appeal 70% of them win some type of real property tax reduction.

If you think you might be over assessed, you probably are and it is well worth your time to continue to research and investigate if you have a case.  The potential savings range from $200 – $3,000 per year for home owners and much more for commercial property owners.  The savings depend on a number of different factors including the value of your property, the tax rate of your city, the amount your property is over assessed by, etc.

Real Property Tax Reduction

Getting a real property tax reduction is really not complicated, and should only take a home owner an afternoon or two to really get an adequate knowledge of the process and how to present your appeal.  Among the various details that owners needs to understand is how to select the right comparable recent sales (Comps), as this is the “meat” of most appeals.  In other words, most owners are appealing their property taxes under the assumption that they are over assessed.  You need to prove this by showing other similar properties that have sold, for less than what your city claims your property is worth.

As you may suspect this can get complicated as cities get “picky” with what properties they are willing to use.  And knowing how to pick the right comps for a relatively inexperienced property owner can be difficult.  For example some cities will not allow you to use comps from properties that sold under “distressed” situations.     

Real Property Tax Appeal

There are other issues besides just comps that owners can dispute.  For example the easiest way to get a real property tax reduction is by showing a mistake made by the assessor.  For example, say you discover that your city recorded your house with 20% more living space than is actually has.  You could easily dispute this.  There are many other mistakes that you should very carefully examine.  Keep in mind that assessors are often under qualified for that position as they are commonly elected officials that may not have any back ground in appraising properties.  Also they are often over worked being responsible for tens of thousands of properties which is daunting task for anyone, no matter the credentials.   

All in all, without sounding overly cynical, owners should be aware that your city does not want to give you a reduction.  It’s money out of their pocket.  One of the biggest mistakes that owners make is failing to abide by the technicalities of the process.  Like having the forms filled out correctly and or being late to the appeal meeting, among many others.  Cities are looking for technicalities to either dismiss your appeal or give you less than a reduction than you deserve; so you need to be diligent and detailed oriented. 

Harris County Appraisal District – Tips for a Successful Property Tax Protest

Harris County Appraisal District assesses property and that value sets your property tax amount. Reducing your property taxes is relatively simple but requires a modest commitment of time. Your other option is to hire a property tax consultant. Basic steps to reducing the property tax assessment set by Harris County Appraisal District include appealing both market value and unequal appraisal annually, obtaining the Harris County Appraisal District evidence, preparing for the hearing(s) and attending the informal and/or appraisal review board hearing. Few property owners are aware of the option to obtain the HCAD evidence. Sometimes referred to as the House Bill 201 package or 41.461 package, this information in invaluable in preparing for your property tax hearing. This article focuses on the hearing process.

There are two options for the “administrative” hearing process at Harris County Appraisal District: 1) the informal hearing and 2) the appraisal review board (ARB) hearing. Neither the property owner nor Harris County Appraisal District is required to attend the informal hearing. About 80% of property tax protests are resolved by agreement between the property owner/property tax consultant and the Harris County Appraisal District appraiser. The second option, which typically occurs if you are not able to reach agreement with the Harris County Appraisal District appraiser, is the ARB hearing. The property owners often receive some property tax relief at the ARB hearing.

Harris County Appraisal District appraisers seldom reduce the assessed value for a home by $100,000 or more. If you are seeking a reduction of more than $100,000 for a home, you should probably skip the informal hearing with the Harris County Appraisal District appraiser. There are several reasons for skipping the informal hearing at HCAD if you are seeking an increase of $100,000 or more. It will likely be a waste of your time. Further, you spend your time helping the HCAD appraiser to prepare their file for the ARB hearing.

Make sure you arrive early for the hearing and try to project a cheerful, cordial and relaxed attitude, even if you are nervous. After you check in with the Harris County Appraisal District clerk, you will likely wait for 30 – 60 minutes. Bring a book, newspaper or work to pass the time. Greet the Harris County Appraisal District appraiser cheerfully and enthusiastically. His goal is similar to yours; reach a compromise quickly. At Harris County Appraisal District, the appraisers are encouraged to make changes if there is evidence to support the change. The exception is unequal appraisal. Most Harris County Appraisal District appraisers are reluctant to make changes on unequal appraisal evidence. HCAD’s approach on unequal appraisal is in flux. However, if your appeal is on unequal appraisal, you will likely need to attend the ARB hearing.

After you exchange and discuss evidence with the Harris County Appraisal District appraiser, he will likely make you an offer to settle the property tax protest. You can accept the offer or continue the appeal with the ARB hearing. In most cases the value offered informally will also be suggested by the Harris County Appraisal District appraiser at the ARB hearing.

Property owners are often reluctant to attend the appraisal review board (ARB) hearing because they think they are wasting their time with such a small property. This is not the case. Harris County ARB members are courteous, respectful and want the property owner to feel good about the ARB hearing.

Players at the ARB hearings include the 3 ARB members, property owner (or property tax consultant) and the Harris County Appraisal District appraiser. After introductions and a brief explanation of the process:



Property owner presents evidence

Questions from ARB members

Harris County Appraisal District appraiser presents their evidence

Questions from the ARB

Property owner rebuttal

Questions from the ARB

ARB panel deliberates and announces a decision



 

In most cases, property owners believe the decision was reasonable. The decision is not subject to negotiation. Thank the ARB members for their time and service. If you are not satisfied with the decision, you can pursue binding arbitration or a judicial appeal.

The appraisal division of O’Connor & Associates is a national provider of investment real estate appraisal services including. Business valuation ,market studies , feasibility studies, real estate consulting, income tax, HCAD, Property tax, Cost segregation, Commercial real estate appraisal, Due diligence

Patrick O’Connor