7 Rental Property Deductions That Landlords Often Overlook

March 1st, 2016 by Anonymous

7 Rental Property Deductions That Landlords Often Overlook

There's an awful lot of sweat equity associated with owning a rental property. There are often mortgages to pay, taxes and insurance, maintenance and repairs, management fees, costs associated with visiting the property and more. The good news is that many of these annual expenses can be deducted when tax time rolls around.

Today, instead of wasting your time on the typical, traditional tax breaks, we're going to highlight seven that are often overlooked...

#1: All of the OTHER Interest Associated with Your Rental

While we're confident you know about mortgage interest deductions, there are additional interest deductions, including home improvement loans, credit card accounts associated with your rental upkeep and any lines of credit used to keep the property in tip-top share.

#2: Depreciation Expenses

Rental properties don't last forever - and neither do the appliances inside of them. While you can't recover all of your depreciation costs in the first few years, with an accountant's help, you can legally depreciate a portion of those costs, for tax purposes. There's a lot of record keeping required, but the pay-off is well worth it at tax time!

#3: The Cost of Repairs - NOT Improvements

Did you have to repaint this year? Hire a plumber to fix a leak? Essentially, if it was something to fix, mend or otherwise "make do" - it's a repair. If you actually replace something - that's an improvement. Improvements aren't deductible. You'll have to instead look to increase your rent or rely on funds from security deposits to recoup those investments. Furthermore, any costs associated with preventative maintenance are fully deductible.

#4: Local & Long-Distance Travel

If you live locally, all of those trips to visit your property, to meet with your property manager or tips to Lowes or Home Depot for maintenance materials can be deducted using one of two options - actual expense deductions (with receipts for gas, upkeep, repairs, etc.) or using your mileage logs. However, mileage logs are common causes for audits. Take some time to brush up on what the IRS wants you to do.

If you've moved away from the area and there are overnight expenses associated with visiting your property, as long as you plan your tip carefully and keep meticulous records, you can deduct the costs of airfare, hotel bills, meals and even some other expenses, too.

#5: Home Office Deductions

We strongly encourage you to consult with your own tax team about all of these potential deductions. While you're at it, see if your rental property portfolio would allow you to deduct home office expenses. In addition to your office, if you have a shed or outbuilding where you store maintenance or repair materials for your rental property, that may also be deductible.

#6: Additional Insurance Policies

While everyone knows that their homeowners insurance is deductible, additional policies on the property are, too. This includes fire, theft, flood and any liability insurance you have to pay.

If you've had a claim or experienced a loss this year, you may also qualify for tax deductions that will cover all or part of the total loss. Total deductions will depend on the level of destruction and how much was covered by existing policies.

#7: All Legal & Professional Services Associated with Your Rental

This includes your monthly management fees, attorney fees, accounting and tax preparation services and any other professionals or advisors you may have hired.

Just remember that the only way these fees can be deducted as operating expenses is if the work done was specifically related to your rental portfolio and activity.

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Categories: Association Management

Tags: real estate tax breaks