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 MAY BE ABLE TO HELP YOU SET THIS UP.
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.
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.
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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