Main Content

Your complete guide to rental property tax deduction

If you’re a landlord putting up your property for rent, you should know that tax season is upon us, and with it comes the pressure of keeping up with checks and balances. Despite that, it is possible to make the most out of the tax season with a bit of preparation and come out on top by paying less than you think you would.

With simple tips and tricks, you can shave off as much as $25,000 per year off property taxes. If you want to know more about how to reduce your property taxes, here are some tips you can do to make sure you can find more money after tax season:

Keep track of your records

As a landlord, it is imperative you keep track of your expenses. Doing so will make it easier to organize and file your taxes. It also provides you with concrete evidence of expenses made on the property when filing claims or when audited by the IRS.

If you’re not sure what expenses are deductible, the most common types are:

  • Advertising and marketing
  • Leasing commissions
  • Professional fees like legal and accounting
  • Interest like in mortgage
  • Business mileage
  • Bank fees.

A few other types of tax deductibles usually taken by real estate investors include repairs and maintenance, insurance, property management fees, supplies, and utilities.

A closer look at the different tax deductions

The next few sections discuss the different tax deductibles you can have as a landlord.

  • Interest
    This is often one of the largest deductible expenses for landlords. Common forms of interest that you can get a tax deduction from include:
    • Mortgage
    • Interest on loans for property improvement
    • Credit card installments made towards property improvement
  • Depreciation of rental property
    The process of deducting a portion of the cost of the property over a course of several years is known as depreciation. Through this, it is possible to get back the money spent on the real estate.
  • Repairs and maintenance
    It may come as a surprise, but the costs spent on repairs and maintenance are deductible costs at the end of tax season. These include but are not limited to:
    • Plumbing
    • Heating
    • Electricity repairs
    • Pool maintenance
    • Pest control
    • Lawn trimming
  • Personal property used in the rental
    As a landlord, you can also deduct the costs on any personal property used on the rented property. This includes furniture, appliances, and equipment. The cost of using your personal belongings in the course of running your rental property can often be deducted in one year (for properties of up to $2,000). The 100% bonus depreciation, which commenced in 2018, will remain in effect until 2022.
  • Pass-through tax deduction
    As part of the Tax Cuts and Jobs Act, the Section 19a Qualified Business Income Deduction, or Pass-through Tax Deduction, incentivizes US taxpayers by allowing the deduction of taxes that come from “pass-through” entities like LLCs, Sole Proprietorships, S Corporations, and C Corporations. The deduction is in effect until 2025.
  • Travel
    You can include travel expenses as a tax deductible when you frequently drive to your different rental properties. You can include the amount of gas spent and the mileage rate. Refer to the IRS website for current rates. If your rental property is out of state and requires you to fly, you can include your airfare, hotel bills, meals, and other expenses in your deductibles.
  • Home office
    If you have a home office or a workspace dedicated to the improvement of your rented property, you can deduct those expenses from your taxable income. This not only includes offices, but also workshops and studios.
  • Insurance
    Any insurance on your rented property is tax deductible. This includes your rental property’s fire, theft, and flood insurance. If you have employees, you can deduct the cost of their health insurance.
  • Legal and professional services
    Fees from professionals like lawyers, accountants, and advisors can be deducted as long as their operating expenses are related to your rental property and business.

At Sundance Property Management, we specialize in helping our clients with everything that has to do with rental investment. From finding the right properties to giving rental property management tips, we can take on the property management task you require in Ohio, Indiana, Kentucky, Georgia, and South Carolina.

We have been in the business of acquiring and managing investment properties like apartments since 1993. Call Sundance Property Management at 513.489.3363 or email iinfo(at)sdpmi(dotted)com to learn more. You can also send us a message here.