Hi, I’m Bette Hochberger, CPA, CGMA. In today’s blog, I will be discussing rental property deductions, and how to maximize returns for landlords.
In the field of real estate, rental properties stand out as one of the most lucrative investments. However, to truly harness their financial potential, understanding the tax landscape is crucial.
As a CPA specializing in real estate, I’ve guided numerous landlords through the maze of rental property deductions. Let’s go ahead unravel the most significant deductions you, as a landlord, can leverage.
Mortgage Interest
For many landlords, mortgage interest is among the highest annual expenses. Thankfully, you can deduct the interest paid on mortgages attached to your rental property. This also includes any interest on loans used for property improvements or personal loans where proceeds went into the rental.
Depreciation
The IRS allows landlords to deduct the cost of the property over several years. This depreciation isn’t based on market conditions but on a set schedule, making it a consistent yearly deduction.
Repairs and Maintenance
Routine repairs and maintenance are part and parcel of rental property ownership. From fixing a leaky faucet to painting walls, these costs can be deducted in the year they are incurred.
Property Taxes
Local and state property taxes on your rental unit are entirely deductible. Ensure you only deduct the portion relevant to the time the property was rented out if it’s not a year-round rental.
Insurance Premiums
Landlords can deduct premiums for nearly all insurance related to their rental property. This includes fire, theft, flood, and even landlord liability insurance.
Utilities
If you, as the landlord, pay for any utilities (like water, electricity, or gas), these amounts can be deducted. Just ensure you aren’t double-dipping if utilities are included in the rent.
Travel Expenses
The costs incurred while traveling to manage, maintain, or collect rent are deductible. This could be mileage for local trips or even airfare for long-distance rental property management.
Professional and Legal Fees
Expenses for professionals like property managers, accountants, or even attorneys can be deducted. This also encompasses any legal fees linked to property management or tenant disputes.
Home Office Deduction
If you manage your rental properties from a home office, a portion of your home expenses (like mortgage or rent, utilities, etc.) might be deductible, based on the office’s size and usage.
Advertising Expenses
Costs to advertise your rental property, be it through online platforms, newspapers, or flyers, can be deducted in full.
Real estate investments, particularly rental properties, offer a plethora of tax deductions that can significantly bolster returns. However, the key lies in knowledge and meticulous record-keeping.
If you’re looking to dive deeper into the intricate world of rental property deductions or need tailored advice, consider reaching out. With expertise in real estate accounting, I’m here to guide landlords in maximizing their investment potential.
I’ll see you all again next time!
