Along with advertising vacancies, screening tenants and looking after maintenance, a property manager can also help you project how much you can charge for rent, make sure you perform required disclosures and fill you in on renters' and landlords' rights. As investment property, all expenses, including utilities, repairs, property taxes, mortgage interest, maintenance and condominium fees are income deductions that likely will produce a taxable loss, subject to the passive activity loss limitations. You can also deduct depreciation over 27.5 years. Rather than net income from rental payments, most investment property owners hope to realize a return when they sell the property. How you sell determines how much, or how little income you'll realize once you pay taxes.
Capital losses are deductible from capital gains and, to a limited extent, other income.
If you choose an installment sale, you finance the purchase and any gain is realized and taxed over the loan's period. Also, you can conduct a tax deferred or tax free exchange. If you trade up to another more expensive investment property, taxes can be deferred. The trade can be tax free if you trade for another similar investment property. Perhaps the largest tax savings are available to those who take advantage of the tax exemption designed for homeowners who live in their homes.