Rental Property Tax Deductions
Owning a rental property can help to generate extra income and offers large deductions and tax benefits. If you own a rental property, the IRS allows you certain tax deductions for the expenses you pay for upkeep, maintenance, and more. Familiarize yourself with this list of rental property tax deductions so you can get the most bang for your buck when it comes to homeownership and renting out your property.
Tax Deductions for Landlords
If you rent out real estate, you must report your rental income on your taxes. You can file your rental property tax deductions the same year that you pay the expenses by using a Schedule E form. Allowable expense deductions from your rental property may include:
Loan Interest
Interest on your mortgage is tax-deductible for rental properties because it’s considered a business expense. Before you file your taxes for your property, you’ll receive a 1098 form from your mortgage lender outlining the interest you’ve paid throughout the year. You can take this deduction from the payments you’ve made towards interest charges.
Maintenance and Repairs
Basic repairs for your property like painting, replacing roof shingles, and any other fixes that keep your property in working condition are tax-deductible. This maintenance and repair for deduction can be defined as any effort to maintain the current condition of your assets.
Depreciation
Wear and tear lowers the value of your rental property over time, also known as depreciation. You can claim depreciation on your taxes; the calculation can be taken from the expected life of the property and must be spread out over multiple years. This also applies to the structure of the home and not the land as a whole.
Property Taxes
Depending on the location of your rental property, a property tax can cost anywhere from a few hundred dollars to a couple of thousand dollars. Landlords can usually deduct property taxes on their rental properties.
Insurance Premiums
All insurance premiums related to business are tax-deductible, including, but not limited to, homeowners’ insurance, theft insurance, general liability insurance, and fire insurance. As a landlord, you can also deduct losses on your taxes such as damage that was caused by a hurricane or theft.
Professional Property Management Services
You can deduct fees that you pay to a property management company, as they’re considered operating expenses. As long as the fees to your real estate management company are work-related, they’re tax-deductible.
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Disclaimer: The information above is a tax guide and tips meant for informational purposes and should not be considered rental property tax advice.