Landlord Real Estate Tax Deductions

Rental Property Tax Deductions

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RENTAL PROPERTY TAX DEDUCTIONS FOR LANDLORDS

ALWAYS CONSULT A QUALIFIED TAX PLANNING SPECIALIST FOR A PROFESSIONAL OPINION

 Real Estate Taxes  for Landlords

Individuals report their rental income and expenses from rental activity on
IRS Schedule E. The general allowable (or standard) rental expenses are on this form.

 YOU ARE ENTITLED TO DEDUCT CERTAIN EXPENSES

Are you one of the many landlords who fail to take advantage of all the tax deductions available as an owner of rental property? Do you keep poor records or rush to the accountant at the last minute? You could save money each year by being more diligent in your record keeping. 

Do you know, or does your accountant tell you or ask you about your rental property expenses? Some accountants, or if you file your own return, may overlook tax deductions you are entitled to as an owner of rental property.

Rental Property: more tax benefits than almost any other investment. 

TAX DEDUCTIONS FOR REAL ESTATE PROFESSIONALS - Full Time Real Estate Professionals receive favorable treatment by the IRS - including 100% deductions not limited to $25,000 per year. Learn more here

Small landlords have many tax deductions available to them - if you actively manage your property and your adjusted gross income is within IRS guidelines. Combined expenses can total $25,000. Losses over that can be carried ahead to the next tax reporting year.

 COMMON LANDLORD TAX DEDUCTIONS

NOTE: ASK YOUR ACCOUNTANT WHICH SOFTWARE THEY USE. YOU MAY BE ABLE TO BUY THE SAME SOFTWARE OR COMPATIBLE FOR REPORTING PURPOSES. YOUR ACCOUNTANT SHOULD ADVISE YOU.

1. Interest. Mortgage Interest for the investment property. Other interest from Credit Cards related to the Rental Activity. It is a good record keeping practice to have both personal and business credit cards (for the rental business).

2. Advertising: If you advertise your rental for rent, those costs are deductible.

3. Depreciation. Residential rental property must be depreciated over 27.5 years. For example, if you pay $200,000 for a home, you expense each year is $7272 per year. It is a "paper loss" that shields your income. A typical homeowner does not have this available to them. IF YOU OCCUPY 1/2 or any portion of the home, you deduction is reduced by the proportion you occupy (in a 2 family, 50% to you, 50% to the investment)

4. Professional Fees:  The costs you pay to an attorney for eviction, a management company, engineer, CPA etc are deductible as they relate to the rental.

5. Home office: You can deduct a home office or workshop used to manage your rental property. Your garage may be storage for your tractor to cut the grass or to hold furnishings you supply.  Certain requirements must be met, but are standard. BE SURE TO DOCUMENT YOUR EXPENSES. The area must be separate and used only for your business - and not general living.

6. Insurance: Your costs to insure the rental property are deductible. ALSO, depending on how you structure your rental business, you may decide to cover your life and medical insurance as part of the rental business. Where medical insurance is not deductible when you work (and pay ) for medical insurance, structuring your rental property as a Limited Liability Company (LLC) may permit you to deduct these costs for you and your family. CONSULT YOUR TAX ADVISOR. 

7. Auto: Your auto expenses are deductible as they relate to your rental business. You may travel back and forth collecting rent, looking at the house , doing yard work etc. Keep records. You may also elect to determine that a portion of the auto is related to the rental activity, the rest personal use - 25% rental activity and 75% personal use, as an example. The expenses are then deducted as to this ratio. You can deduct ordinary and necessary auto and travel expenses related to your rental activities, including 50% of meal expenses incurred while traveling away from home. You generally can either deduct your actual expenses or take the standard mileage rate. You must use actual expenses if you used more than four vehicles simultaneously in your rental activities (as in fleet operations). You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle. Consult your tax advisor.

8. Travel: Portions of a trip to see your far away property may be deductible. Limitations apply.

9. In addition you may also incur charges for:

  • Cleaning and maintenance

  • Commissions

  • Repairs

  • Supplies

  • Taxes

  • Utilities

  • Private mortgage insurance (PMI)

  • Landscaping, Snow Removal, Trash Removal

  • Amounts paid to employees or independent contractors

  • Condo fees

All of which are deductible as they relate to your rental property.
 

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