Your rental property is a significant investment that is a lot of work…but can also yield financial reward. As an owner, it’s critical for you to remain vigilant about protecting that investment, particularly during tax time. Unfortunately, many rental property owners miss out on major deductions when reporting the income associated with their rental. Don’t be one of them. Go into this year’s tax season armed with a few general deduction concepts to ensure you take advantage of everything relevant to your property’s earnings.
Potential deductions for your rental property are:
Mortgage and loan interest is often the most significant deductible expense on a property. Beyond the mortgage and home improvement loans, you should also ask about interest on credit cards for line items used for the rental. **New tax laws enacted recently should be discussed with your tax advisor as some limits have changed, or deductions have been removed.
The cost of repairs on your rental property also falls into the deduction category. Repairs keep your property in working condition. Some common repair costs include replacement of fixtures, hiring contractors, plumbing, painting, appliances, and other common property upkeeps. Improvements are a separate category and are depreciable items. These are items that add/extend the long-term value to your property like replacing a roof or replacing all of the windows. Keep all invoices so you can prove your repair expenses were ordinary, necessary, and reasonable. At Double Z Property Management, we help keep you organized by providing a year-end summary of all expenses related to the management of your investment home and maintaining copies of all receipts.
Depreciation, which is disbursed over several years, is a big-picture/long game kind of deduction. In general, there are three main costs to capitalize and depreciate:
- Structure value (not land)
- Improvement expenses
Discuss these and any other relevant depreciation deductions with your accountant as current laws are confusing. Check out IRS Publication 946, “https://www.irs.gov/pub/irs-pdf/p946.pdf” for additional information and check back on the IRS website for any new changes.
All business-related insurance premiums should qualify as tax deductible. Homeowners, flood, fire, theft, general liability, and any other type of coverage could qualify. If your rental property is the only reason you needed to purchase a policy, you may be able to deduct the expense.
Utilities/HOA or Condo. Association Dues
Electricity, gas, heating, water – you can deduct these costs as long as you’re the one paying for them. Also, you may be able to claim utility expenses if you receive tenant reimbursement. However, you will have to classify repayment as income. HOA/condo dues might also be a deduction. Double Z Property Management helps keep you organized by providing a year-end summary of all expenses related to the utilities/dues paid for your rental receipts.
Professional Services Related To Property
Landlords can categorize fees paid to a wide range of service professionals as operating expenses. This can include property investment advisors, lawyers, and property management firms who are paid for services directly related to your rental process. You can even deduct accountant fees related to your property rental, making it even more worthwhile to seek professional financial guidance before filing your tax returns.
Landlords can deduct travel expenses to “manage, conserve, maintain’ their rental property. Ensure you only deduct the business portion that involves rental activities if you are mixing business with pleasure.
About Double Z Property
Double Z Property Management offers a comprehensive suite of property rental services. Contact our team of property management professionals today to learn more about our services and how we can help you maximize your profits on your investment.
This article provides general information about tax laws, but shouldn’t be relied upon as tax or legal advice applicable to transactions or circumstances. Consult a tax professional for such advice.