Are you paying more taxes on your rental income than you should? Well, that depends on if you’re taking advantage of all the deductions allowed on real estate investment income. Most rental property owners are familiar with the primary deductions that landlords can claim to lessen the amount of income tax paid on their profits. Items such as mortgage interest, depreciation, insurance, maintenance, and repairs. But some expenses tend to be overlooked, resulting in lost deductions and a more significant tax burden. Below, note some of the deductions that often slip under the radar of property owners.
- Expenses incurred while looking for new property
Many investment property owners are constantly on the prowl for additional properties to add to their portfolios. These property-hunting excursions come with a cost that can be deducted if at least half of the time away relates to business matters, and the primary reason for the travel is the rental business. Therefore, lodging, airfare, car rental, meals, etc., are fully deductible as long as they fit the ordinary and necessary label.
- Homeowner association (HOA) dues
Often rental properties are located in communities governed by a homeowner’s association. The benefits of a safe, clean, comfortable community justify the expense of being under the association’s jurisdiction. But because the expense is considered the norm, landlords may pay the fees and forget about them. But come tax time, this is one rental property deduction that landlords will not want to miss. Record the expense and all others relating to each investment property to account for it correctly.
- Subscriptions and memberships
Do you belong to any professional organizations that assist your rental property business in some way? Possibly the local Chamber of Commerce or other community organization that helps you promote your rental units? The dues can be included as a deduction.
What about subscriptions to trade publications that relate directly to the business? And where would you be without the software programs, apps, and online tools used in everyday operations, many of which include a subscription fee? Then there’s cloud accounting tools and cloud storage. Resources that help you manage the business’s social media profiles. The fees associated with these trade pubs and techno-savvy resources are deductible from your rental property income.
- Internet and cell phone expenses
The chances are great that both the internet and your cell phone play a key role in managing your rental properties. You can deduct the percentage of these costs spent on business usage by keeping records and adhering to a reasonable, consistent approach when separating business from personal usage. Establish a formula that accurately reflects how much each service is used for the business, jot it down, and use it each month to determine the expense incurred.
The best bet for taking advantage of all the deductions you’re allowed:
Organize and record all of your receipts throughout the year. This will help you get the maximum allowed deductions, ensuring that smaller and often-overlooked expenses will not fall through the cracks.
About Rentals America
Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management and we’re here to help landlords navigate the rental market.
