Rental properties can add tremendous value to your real estate portfolio in Illinois. However, one obligation of owning rental properties is the responsibility to pay property taxes.
Depending on factors including location and property age and size, your tax requirements may have a hefty price tag. Knowing some strategies for lowering and managing your taxes may help you to save some money.
Fine-tune property management
The strategies you use to manage your rental properties can make or break your ownership experience. According to Yahoo! Finances, Illinois is one of the top ten states with the highest property taxes. Managing your own properties rather than relying on a management company can give you tax benefits.
The IRS will consider your properties as active income so long as you work a specified number of hours each year managing and caring for them. If you do not meet this requirement, the IRS classifies your property as passive income. The classification of your property will influence your property tax amount.
Take advantage of borrowing
Another way to lower your property taxes is to borrow money more often. You can deduct the interest you pay on loans as a business expense when you file your taxes. For example, rather than spending $1,500 on property maintenance, you can take out a loan to cover those costs. Then, not only can you deduct the interest, but you can also retain your $1,500 cash to use for other purposes.
Outrageous property tax amounts may encourage you to reevaluate your assessment. An attorney can help you file an appeal if you suspect that discrepancies have inflated your tax costs.