Uncle Sam gives, and Uncle Sam takes away. But in the case of buying local Somerville investment properties… you can earn investment property tax deductions for your Somerville properties.

For real estate investors, the United States provides the opportunity to earn a living purchasing investment properties… and holding those properties as investments, and of course the income from those properties is taxed.

But many new investors often overlook tax deductions that could have an impact on their bottom line. Today, we’re going to take a look that Somerville Massachusetts real estate investors can take advantage of.

Income Sources You Can Potentially Deduct

Security Deposits

A security deposit is not taxable, based on the thought that your intent is to return this deposit at the end of a lease term. However, if a tenant breaks the lease and forfeits his or her deposit, you can claim the security deposit as income, so long as the deposit is used to make repairs.

These repairs are deductible expenses.

Make sure with your accountant or local property manager that they’re handing your security deposit accounting correctly so you’re not paying income tax on security deposits that you’ll be turning right around and paying back when a tenant leave.

Other Common Investment Property Tax Deductions

By taking advantage of all applicable tax deductions, investment property owners can increase their revenue and reduce their tax liability, opening the possibility to purchase additional properties. There may be other ways to decrease your tax liability. Talk to your financial advisor or certified public accountant, as they typically keep abreast of new tax deductions that Somerville investment property owners can claim.