New Landlords Could Qualify For Tax Breaks on Improvements

By E-Renter Tenant Screening
Posted on November 14, 2012 under Landlord Tips, Legal | Be the First to Comment

If you’re a new real estate investor—having purchased property to rent out in 2012—you may qualify for special tax breaks on improvements. But you’ll have just a few months to make them.

Many new landlords jumped into the business this year, as prices dropped and demand rose. Vacancies are down throughout the country, and rents have been projected to stay stable for the next few years. For lots of investors, 2012 was a good year to get into the real estate rental market.

Attracting quality tenants is perhaps the most important thing to learn for new landlords. But what do good tenants want? In most cases, they want to feel comfortable and safe. For higher-end properties, they also want amenities like wood floors, tile bathrooms, gas fireplaces and upgraded appliances.

If you’re a new landlord thinking of making improvements to your property, ask your tax advisor about the IRS Bonus Depreciation of “personal property improvements” and Increased Section 179 Deduction. Briefly, this section of the tax code allows businesses to write off most or all of the purchase price of qualifying equipment and depreciate updates made in the first year of ownership, with certain limitations and restrictions. It was enacted after 9/11 to encourage businesses to invest in themselves.

December 31 2012 is the deadline; new landlords could qualify for breaks on improvements if they move fast. Some improvements, such as cabinets or new tubs, don’t qualify because they are part of the property. But new appliances, floor coverings, fixtures and paint could qualify—and could help you compete for the best tenants.

Of course, it’s always wise to consult a tax expert BEFORE spending any money that you think you’ll be able to deduct as an expense or depreciate.

Disclaimer:
The contents of this article are intended for general information purposes only, and should not be relied upon as a substitute for obtaining financial or tax advice applicable to your situation. Please consult your tax advisor.