Rental property is a great way to supplement your income or, in some cases, earn a primary income. One of the major benefits of being a landlord are the tax deductions that accompany this income. We have highlighted three areas that can save you big bucks when it’s time to file your income taxes.
1. Finances
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Interest – You can deduct mortgage interest payments and interest towards credit card payments on goods and services used in a rental activity.
Depreciation - The reduction in the value of the rental property over time is deductible.
Insurance - Any premiums you pay on the rental property (fire, theft, flood & landlord liability insurance) is deductible. If you have employees, you can deduct the cost of their health and workers' compensation insurance.
Legal and Professional Services - If you have to hire attorneys, accountants, property management companies, real estate investment advisors, and others for activities towards your rental property, you can deduct those fees.
Casualty and Theft Losses - If you are dealing with casualty losses from fire or flood, you may be able to obtain a tax deduction for all or part of your loss.
2. Travel
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Local Travel - Often you are required to visit your rental property. It may be for anything from dealing with a complaint to making a repair. If the main purpose of travel is related to upkeep of the property, you can deduct travel expenses.
Long Distance Travel - If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses. To deduct local and long distance travel, you must keep records that follow the rules in chapter 5 of Pub. 463.
3. Upkeep
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Repairs - Repairs made to a rental property are fully deductible if they are ordinary, necessary, and reasonable. Some examples of deductible repairs include maintenance of major appliances like water heaters or HVAC units. It also can include painting, plumbing, electrical and structural work.
Employees - Often you need to bring in additional people to assist with activities related to your rental property. You can deduct these wages as a rental business expense.
Learn more about rental property tax deductions and reporting this income here.
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