Here are some of the best rental deductions you can claim to help reduce your tax liability:
Mortgage Interest: If you have a mortgage on your rental property, the interest you pay on that loan is generally deductible. This can be one of the largest deductions for property owners.
Depreciation: You can deduct the costs of the building over a period of years (27.5 years for residential properties). This is a way to recover the cost of the property through annual deductions, even though it doesn’t involve an actual cash outflow each year. However, the land itself is not depreciable.
Repairs and Maintenance: Costs for maintaining your property in good working condition, like fixing leaks, painting, or minor repairs, are fully deductible in the year they are incurred. However, improvements that add value to the property must be depreciated over time.
Property Taxes: Property taxes paid on the rental property can be deducted from your rental income. There’s no cap on this deduction for rental properties, unlike personal residences under certain conditions.
Insurance: Premiums for liability, hazard, and other insurance for your rental property are deductible as operating expenses.
Travel Expenses: If you travel for rental property management, you can deduct travel expenses like mileage, airfare, lodging, and meals, provided they are directly related to your rental activities. Remember, accurate record-keeping is crucial for these deductions.
Advertising: Expenses for advertising to attract tenants, including online listings, print ads, or signage, are deductible.
Professional Services Fees: Legal fees, accounting services, property management fees, and other professional services directly related to managing the rental property are deductible.
Utilities: If you pay for utilities for your rental property, these costs can be deducted. This is particularly relevant if you provide utilities as part of the rent or in between tenants.
Operating Expenses: This includes costs like cleaning supplies, pest control, gardening, and other day-to-day expenses needed to keep the property operational.
Remember, to maximize these deductions, meticulous record-keeping is essential. You should keep all receipts, invoices, and logs of expenses, and consider using property management software to track these for tax purposes. Also, consulting with a tax professional can ensure you’re taking full advantage of the deductions available to you while staying compliant with tax laws.