Attention Landlords! Are you aware of all the tax benefits you can get from your rental property? Below is a list the most common deductions and some you may not know. Please check your local tax code or speak to an accounting professional in your area to confirm these.
1. Management Fees
Management fees are 100% deductible! So if you’re on the fence about hiring a property management company, know that you can write off those costs.
2. Professional Fees
The IRS states you can deduct expenses that are associated in running a rental property business. That includes fees for professionals you use like lawyers, accountants or real estate investment advisors.
Do you pay for newspaper ads? maybe, pay to list your rentals online? Advertising is required for business, so it’s an expense you can deduct.
Make sure your property manager tracks advertising costs for you or, if you’re handling taxes on your own, keep detailed records and receipts to show where you spend your advertising dollars.
According to the IRS, you can deduct repairs that preserve property condition. This includes things like painting, fixing leaks, repairing doors and things of that nature. However, you can’t deduct repairs that improve the value of your home, like adding a deck or a new roof.
Here are a few more tips for ensuring an expense is a repair vs. an improvement.
5. Mortgage Interest
This is one of the obvious ones! You can deduct interest accrued on your mortgages as well as credit cards and other personal loans used for property related expenses. Mortgage and other interest is often a landlord’s biggest deductible expense.
Structures don’t last forever so you can deduct the amount your property depreciates each year, its usually a percentage over 27.5 years. You can also deduct depreciation from upgrades and improvements you make to the home (like that new roof or deck we mentioned earlier)
7. Travel Expenses
Need to visit your property to meet with tenants, or show the property, or resolve tenant issues? You can deduct the mileage and gas as well as upkeep and repairs to your car.
If you invest out of state, you can deduct your travel expenses, such as airfare and overnight hotel stays,. Just be sure to keep all your receipts and make sure that whatever you claim is legitimate.
8. Home Office
This is a less frequent one, Working from home? You can deduct your office, office supplies ,and the depreciation of your office equipment, plus electric, heat and other items associated with an office. However, it is a tedious process and you may want to seek advice from a professional to ensure you file correctly.
If your property is suddenly damaged by fire or flood, property damage can be deducted as casualty losses – but you can only deduct losses that aren’t covered by insurance.
10. Insurance Premiums
Finally, insurance premiums for theft, fire, flood and landlord liability are deductible. And if you have employees, you can also deduct the cost of their health and workers’ compensation insurance.
Always keep in mind that every tax situation is unique and you should consult a tax professional for help. Their expertise can guide you through the deduction process so you can file accurately to avoid tax penalties.
And remember your rental property should be run like a business. take advantage of the tax benefits of that business. Find an experienced property manager, the good ones include property accounting.