I own a rental property outright (no mortgage). We will most likely hire an accountant for at least our first year of doing this, but I wasn't planning on doing this until tax time. I am new to the rental thing and just started giving some thought to taxes. I had the thought that since I have no mortgage payment that I will certainly show a sizeable profit from the rental. I'm not sure this is a good thing.
Would it make more sense to finance the rental property? Would this mean that I could deduct the mortgage payments or would it be just the interest?
Are there other deductions that I'm not aware of that would be more beneficial than a mortgage payment (ie. some sort of depreciation deduction)?
It turns out that I wouldn't get to deduct any mortgage payments by taking out a loan, which I originally thought might be considered a business expense. However, I do get to depreciate the home each year. I also get a straight deduction on repairs. So it has turned out that we get a decent increase in income that only shows up as a modest increase to my overall taxes. Since we've been lucky and have been able to keep the house rented it has been a really wise move to keep the house as a rental. Its value has gone up about 30% since I asked this question. So I could sell at a profit but it doesn't make sense because the income from rent results in a far higher income than I could get by putting the sale money somewhere and just collecting interest. I'm guessing we are ahead by 9 to 10 percent per year by renting out versus putting the money in savings.