Use this money-saving strategy to lower your taxes


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Homeowners learn early on the demands of maintenance and repairs to keep their property in good condition. Rental property owners have the same burden, but they qualify for a tax break designed to help cover the cost of these expenses.


It’s called depreciation.


Depreciation allows property owners to recover some costs of an income-producing property, which the IRS estimates has an average lifespan of 27.5 years. Once a property is put into use, owners are permitted an annual deduction of 3.636 percent of the total cost of the property.


Annual depreciation is also used by business owners to deduct a percentage of the cost of a piece of equipment over a number of years, a tax break that encourages capital investment. This proviso is based on the perceived depreciation of a property over time. Even if a property appreciates, an owner is still entitled to the tax break.

What is depreciation in real estate?

A property’s total cost (sometimes referred to as the basis) excludes the value of the land. If a single-family home is purchased for $250,000 and the land value is $25,000, the basis for the purposes of depreciation deduction on taxes is $225,000.


Land is irrelevant for depreciation purposes, as land is always valuable.


To qualify for depreciation, a property must meet all the following requirements, according to the IRS:

  • The individual filing taxes must personally own the investment property.
  • The individual filing taxes must use the residential property in a business or income-producing activity (such as collecting rent).
  • The property has a determinable useful life.
  • The property is expected to last more than 1 year.

Depreciation is also relevant to a residential property’s general maintenance and improvements. While maintenance and improvements are similar, they have different definitions regarding the tax allowance for rental property owners.


Maintenance is a repair, meaning it returns the property to its original condition. For example, patching up a hole in a roof would be maintenance, while replacing the roof would be considered an improvement. In general, improvements add to the overall property value.


The tax allowance that accompanies home improvements takes into account expenses, like materials and labor, but it does not factor in the owner’s time and labor.

How to calculate real estate depreciation savings in three steps

To calculate property tax savings from real estate depreciation, multiply the rental property’s depreciation expense by the marginal tax rate.


If there is a depreciation of say, $5,000, and a taxpayer is in the 22 percent tax bracket, that person would save $1,100 ($5,000 x 0.22) in taxes that year. The amount of depreciation reduces tax liability for the year.


An owner who earns income from single family rental typically reports income and expenses for each investment property on the appropriate line of Schedule E in an annual tax return and records the net gains or losses on the 1040 form. An owner can record a depreciation expense on Schedule E.


In order to calculate real estate depreciation savings, the IRS recommends that owners use the Modified Accelerated Cost Recovery System (MACRS) to apply for tax relief for residential rental investment properties placed in service after 1986.

  1. Land and home prices together equal the value of real estate, but depreciation only applies to the home. The value of the land should be deducted from the property’s purchase price or fair market value.
  2. Land does not lose value or wear out, but the IRS allows depreciation for the useful life of a building. The time frame is 27.5 years for residential rental real estate and 39 years for commercial property. Divide the home’s value by 27.5 to get the depreciation expense.
  3. Multiply the depreciation expense by marginal tax rate to get the tax savings from real estate depreciation.

How long can a property owner claim depreciation?

An owner can claim a depreciation deduction until either of these conditions are met:

  • The entire cost, or the basis, of the property has been deducted.
  • A rental asset is retired from service, even if the cost has not been recovered.
  • A property is retired from service when it ceases to be an income-producing asset — or if it is sold, converted to personal use, abandoned or destroyed.

What type of expenses can an owner write off?

Rental homeowners can write off many expenses in addition to factoring depreciation into their taxes. Aside from annual depreciation, there are some tax deductions that are available to rental property owners.


According to the IRS, the following are eligible for deductions in the year a landlord pays for them:

  • Advertising
  • Auto and travel expenses
  • Cleaning and maintenance
  • Commissions
  • Insurance
  • Interest (other)
  • Legal and other professional fees
  • Local transportation expenses
  • Management fees
  • Mortgage interest paid to banks, etc.
  • Rental payments
  • Repairs
  • Taxes
  • Utilities

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These 2 Western cities are the most financially fit in the US


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Financial fitness has little or nothing to do with how much you spend on gym memberships each month. But there are plenty of ways to measure financial fitness, from monitoring personal bill-paying activity to tracking cost of living regionally.


LendingTree researchers devised financial fitness scores for the 100 largest U.S. metros, taking into account five individual factors (such as the percentage of income that goes toward owning or renting a home and the percentage of people with at least one maxed-out credit card) and four community factors (such as unemployment rates and real personal income).


Two Utah metros come out at the top, while the two largest metros in the U.S. come out at the bottom. Here’s what else researchers learned.


AaronAmat / istockphoto


  • Utah steals the show when it comes to financial fitness, with Ogden and Provo taking the first and second spots with final scores of 81.4 and 77.5, respectively. Salt Lake City makes a respectable showing at No. 8 with a final score of 70.2.
  • Madison, Wisconsin rounds out the top three, with a final score of 76.5. Madison has one of the lowest unemployment rates — 3.5% — across the 100 metros examined.
  • The two largest metros in the U.S. — New York and Los Angeles — finish at the bottom, with financial fitness scores of 32.5 and 34.6, respectively.
  • McAllen, Texas, comes in third to last with a final score of 36.3. Despite being the cheapest place to live, this Texas metro has the lowest real personal income and the highest unemployment rate, so it’s no surprise that personal struggles with bills and debt follow.


Deposit Photos


LendingTree analysts scored the 100 largest metropolitan statistical areas (MSAs) across two categories — community score and individual score — to determine the overall financial fitness of those MSAs.


These two scores were averaged to create a final score, upon which the MSAs were ranked from highest to lowest. The highest possible scores for each category and the final score was 100, and the lowest was zero.


Each metric was first scored according to its relation to the best value (100 points) and the worst value (0 points) among the metros. These metrics were then averaged according to the weights below to create the category score. The final score was equally weighted between the community and individual scores.


In addition to publicly available sources, researchers reviewed more than 300,000 anonymized credit reports of LendingTree app users. The composite metrics represent the latest data available.


nortonrsx/ istockphoto


  • Final Score: 59
  • Community Score: 56.6
  • Individual Score: 61.4


  • Final Score: 59
  • Community Score: 55.9
  • Individual Score: 62


  • Final Score: 59.2
  • Community Score: 51.6
  • Individual Score: 66.8


  • Final Score: 59.7
  • Community Score: 58.3
  • Individual Score: 61.1


  • Final Score: 59.7
  • Community Score: 59.6
  • Individual Score: 59.8





  • Final Score: 60.7
  • Community Score: 61.4
  • Individual Score: 60



Kruck20 / istockphoto


  • Final Score: 60.8
  • Community Score: 51
  • Individual Score: 70.6



tonda / istockphoto


  • Final Score: 60.9
  • Community Score: 49.5
  • Individual Score: 72.2


  • Final Score: 60.9
  • Community Score: 50.2
  • Individual Score: 71.6


  • Final Score: 61
  • Community Score: 52.6
  • Individual Score: 69.3


  • Final Score: 61.2
  • Community Score: 57
  • Individual Score: 65.4



felixmizioznikov /istockphoto


  • Final Score: 61.9
  • Community Score: 56.2
  • Individual Score: 67.6





  • Final Score: 62.6
  • Community Score: 53
  • Individual Score: 72.2



aiisha5 / istockphoto


  • Final Score: 62.7
  • Community Score: 61.7
  • Individual Score: 63.6



Johnny Warrior / istockphoto


  • Final Score: 62.9
  • Community Score: 59.3
  • Individual Score: 66.5





  • Final Score: 63.3
  • Community Score: 62.3
  • Individual Score: 64.3


  • Final Score: 63.3
  • Community Score: 60
  • Individual Score: 66.5



RoschetzkyIstockPhoto / istockphoto


  • Final Score: 63.4
  • Community Score: 64.8
  • Individual Score: 61.9



istockphoto/Vito Palmisano


  • Final Score: 63.4
  • Community Score: 55.8
  • Individual Score: 70.9



Kruck20 / istockphoto


  • Final Score: 63.7
  • Community Score: 57.3
  • Individual Score: 70.1



Jacob Boomsma / istockphoto


  • Final Score: 64.1
  • Community Score: 63.3
  • Individual Score: 64.8





  • Final Score: 64.3
  • Community Score: 55.3
  • Individual Score: 73.2


  • Final Score: 64.4
  • Community Score: 56.6
  • Individual Score: 72.2



Deposit Photos


  • Final Score: 64.5
  • Community Score: 61
  • Individual Score: 68


  • Final Score: 64.7
  • Community Score: 56.8
  • Individual Score: 72.5



Sean Pavone / istockphoto


  • Final Score: 64.8
  • Community Score: 62.2
  • Individual Score: 67.3





  • Final Score: 65.2
  • Community Score: 60.9
  • Individual Score: 69.4



Nicholas Smith / istockphoto


  • Final Score: 65.5
  • Community Score: 55
  • Individual Score: 75.9


  • Final Score: 65.8
  • Community Score: 61.7
  • Individual Score: 69.8


  • Final Score: 66
  • Community Score: 61.1
  • Individual Score: 70.8



Deposit Photos


  • Final Score: 66.1
  • Community Score: 57.1
  • Individual Score: 75



benkrut / istockphoto


  • Final Score: 66.9
  • Community Score: 60.7
  • Individual Score: 73



SeanPavonePhoto / istockphoto


  • Final Score: 67
  • Community Score: 62.1
  • Individual Score: 71.8


  • Final Score: 67.6
  • Community Score: 58.4
  • Individual Score: 76.7





  • Final Score: 67.7
  • Community Score: 54.4
  • Individual Score: 81





  • Final Score: 68.1
  • Community Score: 61.4
  • Individual Score: 74.8





  • Final Score: 68.2
  • Community Score: 64
  • Individual Score: 72.3





  • Final Score: 69.1
  • Community Score: 63
  • Individual Score: 75.2



f11photo / istockphoto


  • Final Score: 69.2
  • Community Score: 59.8
  • Individual Score: 78.5



Sean Pavone / istockphoto


  • Final Score: 69.4
  • Community Score: 63.5
  • Individual Score: 75.3


  • Final Score: 69.9
  • Community Score: 64.4
  • Individual Score: 75.4


  • Final Score: 69.9
  • Community Score: 61.9
  • Individual Score: 77.9



aceshot / istockphoto


  • Final Score: 70.2
  • Community Score: 72.3
  • Individual Score: 68


  • Final Score: 70.8
  • Community Score: 69.8
  • Individual Score: 71.7



dangarneau / istockphoto


  • Final Score: 71.6
  • Community Score: 72.5
  • Individual Score: 70.6



Deposit Photos


  • Final Score: 72
  • Community Score: 65.1
  • Individual Score: 78.8





  • Final Score: 73.2
  • Community Score: 64.7
  • Individual Score: 81.6



Sean Pavone/istockphoto


  • Final Score: 76.5
  • Community Score: 73.1
  • Individual Score: 79.8


  • Final Score: 77.5
  • Community Score: 75.6
  • Individual Score: 79.3





  • Final Score: 81.4
  • Community Score: 81.8
  • Individual Score: 80.9



Scott Catron from Sandy, Utah, USA


Location can certainly help you maintain financial fitness, but your personal habits will follow wherever you go, so make sure yours are helping you meet your financial goals.



Rawpixel / istockphoto


Achieving overall financial fitness often means addressing several different problem areas. Maybe you don’t have credit card debt but you struggle to keep a solid emergency savings.


“Knowing what you want most from your money is the vital first step,” LendingTree chief credit analyst Matt Schulz said. “You have to know where you want to go before you can figure out how to get there.”


Cn0ra / istockphoto


Once you’ve identified your goals, you’ll want to lay out a plan of how to achieve them.


“If you don’t know exactly how much money is coming in and going out of your household each month, it’s really tough to make a meaningful plan for your financial future,” he said.


Lyndon Stratford / istockphoto


Life can often impede on your budget, whether that means a sudden loss of income or another major unexpected expense. Financial fitness won’t stop those things from happening, but it can help mitigate the effects if you’re consistently working to improve your situation.


“Financial fitness is about good habits done over a long stretch of time,” Schulz said. “It is absolutely a marathon rather than a sprint.”


You might not think taking out a personal loan can help you get out of debt, but Schulz said debt consolidation loans can work for people juggling multiple payments.


“Not only can it knock down your interest rate, it can streamline your payments,” he said. “Instead of dealing with three or four different creditors, you can consolidate them into one loan, make one single payment and simplify your financial life tremendously.”

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