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Landlords – Common Rental Tax Deductions

Posted by Kent Hamilton on March 9, 2020
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As a landlord, you will enjoy a variety of tax deductions. They typically fall into two categories, capital expenses, and current expenses.  The difference basically boils down to whether or not you will take the entire deduction in one year or if you will spread the deduction out over time. The most common current expense would be a normal home repair or anything that fixes something at the property.  An example of a capital expense would be replacing your roof or anything that adds significant value to your property.

Repairs & Maintenance

You can deduct “reasonable and necessary” maintenance and repair costs for your rental property. This can include the cost for the plumber to fix the toilet or for the handyman to replace the back door. It can also include preventative maintenance like cleaning the gutters.

Depreciation

Depreciation is definitely a subject you want to discuss with your tax professional. Having said that, depreciation is a flagship tax deduction for real estate investors.  Basically, you can deduct a portion of what you paid for your rental property over time. This deduction is determined through a variety of factors. When discussing this number with your tax professional be ready to provide the sales price, as well as the estimated land value at the time you purchased the home.

Taxes

Yes, you can deduct the property taxes as well as the county and state taxes!

 Professional Services

You can deduct property management fees as well as attorney fees and any other professional services that you have relied on to conduct business associated with your rental property.

Insurance

The most common insurance deduction is your Landlord or your Hazard policy. However, don’t forget any other insurance policies that may be associated with your property. Many of our clients purchase umbrella policies designed to cover an investor’s personal asset and often extend coverage for other policies. 

Loan Interest

If you have a mortgage on your rental property you may be eligible to deduct the interest, you pay on the loan each year.  Points paid at closing are also tax-deductible in most cases.  If you purchase something for your property on a credit card the interest, you pay for that purchase can also be deducted.

Utilities

If you had a vacancy and had to pay for utilities during the vacancy period you can deduct utility charges.

Start-Up Legal Costs

If you created an LLC or other entity associated with your rental property you can deduct the costs to do so.

Rental Property Losses

Sometimes things just don’t work out. When you receive less rent than your operating costs you may be eligible to write the loss off.

Remember to document everything thing that you intend to deduct.  Also, be sure to consult a professional as there are some limitations based on your income and circumstances.

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