Real estate is one of the most tax-advantaged investments in America, and Alabama’s low property taxes make it even more attractive. Here are the key tax benefits available to rental property owners.
Depreciation
The IRS allows you to depreciate residential rental property over 27.5 years. On a $100,000 property (land excluded), that’s roughly $2,900/year in “paper losses” that offset your rental income — even though your property may be appreciating in value. This can significantly reduce or eliminate your tax liability on rental income.
Expense Deductions
Nearly every operating expense is deductible: property management fees, repairs and maintenance, insurance, property taxes, mortgage interest, travel to inspect the property, advertising, and legal/professional fees. Keeping thorough records is essential — our owner portal provides detailed monthly statements for easy tax preparation.
Alabama’s Low Tax Burden
Alabama has no state-level property tax. Local rates are among the lowest nationally, and the assessment ratio for investment property is just 20%. Combined with no state estate tax, Alabama is exceptionally investor-friendly.
Pass-Through Deduction
If you hold property through an LLC (which we recommend), you may qualify for the 20% pass-through deduction under Section 199A, further reducing your taxable rental income.
Disclaimer: This is informational content, not tax advice. Consult a CPA for your specific situation.
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