Tax Deductions for Owners

Tax Deductions for Landlords

Topic: Rental Property Investment Strategies

You may be able to take a number of landlord tax deductions that can save you big money on your return. The following list of tax deductions for landlords may be easily overlooked, so pay attention.

Interest Expenses: Landlords can deduct mortgage interest payments and interest on construction loans used to acquire or improve rental property. Credit card interest on expenditures for goods or services used in a rental activity is also deductible.

Property Depreciation: Residential rental property must be depreciated over 27.5 years.

Property Repairs: The costs of repairs to rental property are fully deductible during the year they are made. Replacing broken windows, repairing lights, fixing floors, painting gutters and other structural features are examples of repairs that can be deducted.

Local Travel: Landlord’s tax deductions also include the cost of travel related strictly to their rental activity. Landlords have the option of using the standard mileage rate deduction or actual expenses, which include vehicle repairs, upkeep and gasoline, whichever is more advantageous. The standard mileage deductions increase every few years, so ask your accountant for the latest amount.

Out-of-Town Travel: Any landlord traveling overnight for rental activity can deduct airfare, hotel bills, meals and other expenses. Remember to document these expenses carefully.

Insurance Related to the Rental Business: Fire, theft, liability and flood insurance related to the rental property are possible deductions. Likewise, health and workers’ compensation insurance may also be eligible for deduction for landlords.

Home Office: Landlords may also deduct home office expenses from their taxable income if they meet requirements for doing so. This landlord tax deduction may also apply to workshops or other workspace exclusive to the rental business. As with all deductions taken as a landlord, you should run this one past your accountant first because there are tight restrictions governing home offices.

Employees/Independent Contractors: Any formal hires of full-time, part-time or contract labor for a real estate business can be deducted as a rental business expense.

Casualty/Theft Losses: If rental property is damaged or destroyed by a weather event or foul play, it is possible to get a tax deduction for all or part of the loss. However, this depends on how much property was destroyed and how much of the loss was covered by insurance.

Legal/Professional Services: Fees to attorneys, accountants, property management companies, real estate investment advisers and other property-related professionals can be deducted as operating expenses as long as they relate solely to rental activity

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