The latest statistics reveal there are about 11 million individual investor landlords. Are you one of them? If so, there are some things you might not know when it comes to tax rules for rental property.
When it comes to your investment rental property, make sure you’re getting the most bang for your buck out of your tax returns each year. Keep reading for six rental property tax deductions you should know about!
1. Mortgage Loan Interest
Did you buy your investment property with a loan? One of the biggest deductible expenses on your tax return is the interest paid on the mortgage loan. This deduction is for your home loan but it’s also one of the rental property tax deductions you can take.
The deduction is on the interest only, not the entire mortgage payment. Check your monthly mortgage statement and take note of how much of the payment goes toward interest. Multiply the monthly amount by 12 to calculate your annual mortgage interest payment.
Take note of any origination fees or points paid when purchasing or refinancing a rental property. These are also tax-deductible.
2. Property Management Fees
Do you use a rental home management company to oversee your rental income property? They’re a huge help, especially if you don’t live near the rental property. Property management fees are administrative expenses on the rental property and are also tax-deductible.
3. Rental Property Depreciation
Depreciation for rental properties is a complex process but it can help you save money on your taxes. Depreciation is the loss of rental property value over time due to wear and tear.
You must spread depreciation deductions over many years and can’t take them the year you buy the property. Depreciation is only on the value of the structure, not the land it sits on.
4. Repairs and Maintenance
Some home improvements are deductible as depreciation but some repair and maintenance costs are separate deductions. These include repair and maintenance necessary for renting out the property as long as they don’t add significant value to the rental property.
These include spraying for pests, maintaining the HVAC system, painting, and plumping. The costs for hiring someone to do maintenance and repairs are also deductible.
5. Some Legal Fees
Some legal fees are rental property tax deductions. Did you have court fees or legal fees for evicting a tenant? These fees are tax-deductible.
You can also deduct lawyer fees for some other types of rental paperwork. If you need a lawyer to defend the title to your investment property, those fees are NOT tax-deductible.
6. Professional Fees
Do you pay a CPA to do your taxes? The CPA can deduct the cost from your taxes. Other operating expenses, such as advertising the property to get tenants, are also tax-deductible.
Rental Property Tax Deductions
A rental property is a good investment and can bring many years of added income. Always keep detailed records of all your expenses as well as income from the property. This makes it easier for you or an experienced CPA to get the most tax deductions for your property.
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