What Rental Expenses Can I Deduct?

As a landlord, you may be familiar with the many expenses that come with owning rental property. Some of these include repairs and maintenance costs, insurance, utilities such as electricity and water bills, and mortgage payments. There are also tax deductions for landlords to consider when filing taxes each year. The following blog post will discuss some common tax deductions available to landlords across the country.

Here is a list of the top ten tax deductions for landlords:

1. Interest

The most common deductible item for a landlord is interest. Mortgage interest payments on loans used to acquire or renovate the rental property, as well as interest on credit cards for goods or services used in a rental business, are common instances of interest that landlords can deduct.

2. Depreciation for Rental Real Property

The cost of a house, apartment building, or other rental property is not entirely deductible in the year of purchase. Landlords, on the other hand, recover the cost of real estate through depreciation. This entails subtracting a percentage of the property’s cost over a number of years.

3. Repairs

Repairs to rental property are entirely deductible in the year in which they are incurred (assuming the repairs are ordinary, necessary, and fair in amount). Repainting, repairing gutters or flooring, repairing leaks, plastering, and replacing broken windows are all instances of deductible repairs.

4. Personal Property

The cost of personal property used in a rental activity can normally be deducted in one year utilizing the de minimis safe harbor deduction (for property costing up to $2,000) or 100 percent bonus depreciation, which will be available from 2018 through 2022.

5. Pass-Through Tax Deduction

Most landlords will be eligible for a new pass-through tax deduction under the Tax Cuts and Jobs Act beginning in 2018. This is not a rental deduction, but rather a specific income tax deduction. Landlords may be entitled to deduct up to 20% of their net rental revenue, or 2.5 percent of the initial cost of their rental property plus 25% of the amount they pay their staff, depending on their income.

6. Travel

For the majority of the driving they perform for their rental business, landlords are eligible for a tax break. You can deduct your travel expenditures when you drive to your rental building to deal with a tenant complaint or go to the hardware shop to get a part for a repair.

7. Home Office

Landlords can deduct their home office expenses from their taxable income if they meet certain minimum conditions. This deduction is applicable not only to office space but also to a workshop or other home workspace used for your rental business. This is true whether you own or rent your home or apartment.

8. Employees and Independent Contractors

You can deduct the wages of anyone you pay to execute services for your rental business as rental business expenditure. This is true whether the worker is a full-time employee (such as a resident manager) or a freelancer (for example, a repair person).

9. Insurance

For your rental activity, you can deduct the rates you pay for nearly any insurance. This comprises rental property fire, theft, and flood insurance, as well as landlord liability insurance. You can also deduct the expense of your employees’ health and workers’ compensation insurance if you have them.

10. Legal and Professional Services

Finally, fees paid to lawyers, accountants, property management companies, real estate investment advisors, and other experts can be deducted. If the fees are paid for work relevant to your rental operation, you can deduct them as operating expenses.

For more information, check out our page on rental property expenses.