Take Advantage of These Tax Tips for Landlords to Save at Filing Time
Tax deductions for landlords? Sure, your accountant knows all about these. But it’s important that you, the rental property owner, know them, too. You’ll want to keep careful records so you can take advantage of every opportunity to legally reduce the tax on your rental income.
Some Key Tax Deductions for Landlords
Mortgage Interest: The interest portion of your mortgage payments is usually one of your largest deductible expenses.
Repairs and Maintenance: Minor repairs like replacing a light fixture or fixing a leak are 100-percent deductible in the year you pay for them.
Property Taxes and Insurance: Insurance premiums and the property taxes you pay during the year are fully deductible.
Advertising and Marketing: The amount you pay to advertise your property for rent, including signs, is deductible.
Professional and Legal Fees: Fees paid to property managers, lawyers, accountants, or real estate agents are deductible operating expenses.
Utilities: If you pay for utilities such as water, gas, or electricity, these costs are deductible.
Home Office Deduction: If you devote a part of your home exclusively for your rental activities, you may qualify for a home office deduction.
Depreciation: One of the Biggest Tax Deductions for Landlords
Depreciation normally drives down your taxable rental income substantially. Depreciation is essentially expensing the cost of a large asset over the expected lifetime (more or less) of the asset. For residential rental dwellings (but not the land), that’s normally 27.5 years.
In addition to the building itself, large projects, called capital improvements, that increase the value or extend the life of the rental are depreciable as well. Things like a new roof, a fence, even major landscaping are eligible for depreciation. You can also depreciate things like new major appliances, or a new furnace. But the period involved is shorter than for the rental itself.
It’s important to distinguish between capital improvements and repairs. For example, adding a bathroom is a capital improvement; replacing a toilet is a repair.
Links
The IRS details what it considers rental income.
Lastly, you can learn more about our services here!
Recent Comments