Rental Property Tax Deductions

Being a rental property owner can be a very lucrative business, but it also comes with responsibilities. These responsibilities can be overwhelming if you do not know how to manage them. Many property owners pay a massive amount of tax, and these taxes depress their income. Are you one of the owners that pay massive taxes? It is because you do not take advantage of the tax deductions that are available for rental property owners. These deductions can mean the difference between losing and making profits in this business.

Here are some tax deductions for rental property owners:

Property Tax

Tax on properties can be massive, ranging from hundreds to thousands of dollars. The tax on your rental property varies depending on your property’s location. You can determine your exact tax by inquiring with your tax office or checking your escrow summary.

If your state or location has rental licensing requirements, you can deduct any landlord or vacation rental license fees. The cost of the personal property used in the rental activity can get deducted in one year. These personal properties include furniture, appliances, gardening equipment, etc.

If you manage short-term rentals, your state, city, etc., might charge a fee known as occupancy fee. These fees are similar to sales taxes, and you can deduct them also. If you pay sales taxes on social security taxes, wages, business-related items, inspection fees, etc., you can deduct them as well. Tax deductions allow a more convenient operation for rental property owners. With these benefits, you can make a profit and not lose in the property rental business. Ensure you know your entitlements and claim them for the best.

Loan Interest

Interest is one of the most significant deductible expenses most landlords or property owners benefit from. Most homeowners use a mortgage to acquire their own home, which is also applicable to rental properties. Landlords can deduct the part of their mortgage payment that goes towards interest charges. They can deduct mortgage interest on loans used to improve or acquire a rental property. They can also deduct interest on the credit card for services or goods used or purchased in the rental activity. To qualify for these deductions, you must have made this purchase before tax time.

The deductions’ components get separately listed on your monthly statement, only needing you to multiply by 12 to get your total annual interest. The Tax Cuts and Jobs Act caused a reduction to the interest deduction for landlords that make more than $25 million from their rental. You can avoid this by agreeing to depreciate your rental property over thirty years instead of 27.5 years.

Property Management Companies, Legal, and Professional Services

Property owners can deduct fees paid to property management companies, real estate investment advisors, accountants, attorneys, and other professionals in the fields. A property management company provides commercial and residential property management services. These services include the maintenance of residential and investment condominiums and apartments. Since their fee is payment for work related to rental activities, you can deduct them as operating expenses. This deduction makes it easier for property owners to hire property management companies in their area for better operation.

Travel and Transportation

If you are one of the landlords that travel to multiple properties, you can deduct your transportation expenses. You can also deduct travel expenses if your residential area is far from your rentals, requiring you to travel or transport yourself. After that, you might want to start thinking of remodeling options that will completely transform the space.

Landlords have an entitlement to a tax deduction for driving as part of their rental activities. They drive their vehicles to stores to buy hardware for repairs of rental property, drive to the rental building to resolve tenant complaints, etc. They can deduct these expenses, saving them some cash. They can deduct costs that include gasoline purchases, vehicle repairs, vehicle upkeep, etc. They can also deduct the expenses using the standard mileage rate. To qualify for the standard mileage rate, you have to use it in the first year you use your vehicle for the rental activities. You can check the IRS website for the current standard mileage rate.

Rental property tax deductions make the difference between profit and loss for many rental property owners. They save costs, increasing the ROI on rental properties. With these property tax deductions, the rental business can be more lucrative.

We hope you found this blog post Rental Property Tax Deductions useful. Be sure to check out our post How To Create A Profitable Rental Property for more great tips!


Rental Property Tax Deductions

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