The good news is that Uncle Sam offers substantial tax advantages to owners of investment property.  As a Landlord, you are able to subtract depreciation and mortgage interest from your rental income (and in the case of a loss, from your adjusted gross income if it is under $150,000).  You can also depreciate the part of the purchase price that represents the building-though not the land it sits on, over a period of 27.5 years.  Additionally, you can write off property improvements and other operating costs associated with running the business.

One big caveat if you are considering renting out a property that had been your primary residence: Such a move can bite back when you are ready to sell.  For one thing, a rental property does not qualify for the same capital-gains benefits as a primary residence: for another, deductions you have taken for depreciation can mean higher capital-gains penalties.  As New York City fee-only financial planner and attorney Gary Schatsky puts it, “Think long and hard before renting-you are giving up the opportunity to earn a tax-free gain”.