Navigating Property Tax Management: Strategies for Optimizing Tax Expenses

Navigating Property Tax Management: Strategies for Optimizing Tax Expenses

The best tip for property accounting is to learn a few strategies to optimize tax expenses, but where do you begin?

Many owners struggle with property tax management because it requires a lot of documentation and attention to detail. Without using a few strategies, you may not only prevent yourself from maximizing profits, but you may also accidentally break the law.

To help you, PMI Central Oregon will outline a few simple strategies that will drastically improve your properties. Keep reading to learn all about tax management!

Invest in Maintenance and Repairs

One of the main things about taxes to understand before investing in real estate is that maintenance and repairs are deductible. This means that when you pay for a repair, you can reduce your taxable income by the amount you spent.

Like maintenance and repairs, capital improvements can also help you reduce your taxable income. Capital improvements are additions or upgrades that improve a property's value.

For example, some of the best capital improvements are kitchen and bathroom remodels. These not only make your property look more attractive, but they can also significantly increase its value while helping you save money.

Deduct for Depreciation

Another strategy to help you optimize tax expenses is to deduct your property's depreciation.

In the US, property value often depreciates at a rate of 3.63% for 27.5 years. The exact amount for which it depreciates varies depending on a variety of factors, such as what you use the property for and its age.

Because of this, learning how to calculate property depreciation can help you maximize savings, regardless of the type of property you own.

However, you must keep in mind that the value of a property's land does not depreciate. When deducting for depreciation, you must only account for the property's value.

Understand Self-Employment/FICA Tax

When you start investing in real estate, one of the most important things to understand about tax expenses is that rental income is generally not taxable.

Those who are self-employed often have to pay a self-employment/FICA tax of 15.3% on their earned income. However, when earning money from a rental property, all you must do is report it.

As a property owner, this can help you earn more money without having to rely on other types of investments that are typically taxed. However, you should always research local laws on property taxes to ensure you do everything correctly.

If you have any issues determining whether you can deduct your rental income, a property manager can help you.

Master Property Tax Management with PMI Central Oregon

Now that you know a few strategies to optimize tax expenses, you should start working with PMI Central Oregon to truly maximize profits from your properties.

We have been in the property management industry for many years and have worked with all kinds of investors. No matter how much experience you have as a property owner, we can ensure you get the best results.

Contact us now to find out how we will help you with property tax management and much more!