Tax deductions let business owners offset business costs when filing their income taxes. Deductions lower the business owner’s taxable income, thereby lowering their overall tax bill.
As any landlord knows, owning a rental property involves plenty of costs! Fortunately, many of those expenses have a corresponding tax deduction. To avoid paying higher taxes than necessary, here are some common tax deductions for rental property owners.
Building purchase price: One of the highest costs of owning rental units is the purchase cost. Rental property purchases may be deductible in full or in part. However, conditions may apply, and you may not be able to deduct the entire amount at once. Carefully follow depreciation rules when taking this deduction and consult a tax professional with questions.
Mortgage interest: If you took out a mortgage or another type of loan on your rental property, the interest you pay on that loan is a deductible cost.
Property taxes: Another recurring cost of owning property is property tax. On a limited basis, these taxes are usually deductible as a business expense.
Maintenance costs: Every rental property requires upkeep, such as mowing the lawn or replacing broken fixtures. Maintenance expenses are deductible. However, verify with a tax professional how to split deductions over several years instead of taking a one-time deduction.
Property insurance: Owning rental property requires insuring the property against potential damage. On your taxes, you can deduct the cost of these premiums.
Hiring employees, contract workers, or professional services: Whether you employ staff, a property manager, a lawyer, or an accountant, you can deduct their salaries as business expenses.
Other operating expenses: Additionally, if you pay HOA fees, utilities, advertising, or continuing education costs, remember to deduct these fees on your taxes. And if you must travel to your rental properties, be sure to deduct mileage, airfare, and hotel costs. When you log expenses properly, the deductions will add up nicely.
Consult a professional to see which tax deductions apply to your business and how to properly claim them. Only an expert can advise you of the most up-to-date regulations and how they apply to your business taxes. Considering your potential tax deductions now will help you be prepared for next year’s tax season.
About Rentals America
Rentals America provides full-service property management for residential rental properties. Our team is wholly dedicated to property management, and we’re here to help landlords navigate the rental market.
