Tax Deductions For Your Rental Property

As a property manager, you are responsible for paying taxes on the income you make, namely the rent that tenants are paying. However, like any business owner, there are certain deductions you can take to reduce the income you owe, which then reduces the amount of tax you owe. Be sure you hold onto any receipts that may apply to these deductions in case your accountant needs to see them or in case you get audited.

Repairs and maintenance

While you may do everything in your power to try to avoid expensive repair costs, it is inevitable that repairs will need to happen at some point. A tenant may not know when something is becoming a problem until it is too late and the issue is too large to stop. Although they may be expensive upfront, you will be able to use them as tax deductions when you file your taxes.

You can also deduct maintenance costs. These costs can include things like landscaping, snow plowing, and plumbing you need to have done to maintain your property. Some maintenance costs also help reduce repair costs down the line, so you can save money on repairs and taxes. Make sure you get a receipt or record if you have services done to have in your tax files should you be audited.

Along with services you use for repairs and maintenance, if you use any products like drain cleaner and tree trimmers, you can deduct these purchases from your taxes if they were purchased during the tax year you are filing for.

Landlord insurance

Just like your tenants have renters’ insurance, you likely have landlord insurance. Landlord insurance covers things like liability, property, and replacement of rental income. You can even purchase additional insurance depending on what you need for your specific property. While this is an expense you need to protect yourself, your property, and your valuables, it can be deducted from your income.

Image: Karolina Grabowska via https://www.pexels.com/photo/person-counting-cash-money-4475523/

Marketing

Marketing your property is a crucial part of your business, and as such, it is something that you can use as a tax deduction. This applies to things like websites, supplies for housing fairs, and even social media-promoted posts. It also applies to printing flyers that you may hang around a nearby college campus to attract student tenants to your rental property. Many landlords also offer free items, especially if they promote their properties at housing fairs. These items can be deducted from your taxes if they are used for marketing purposes.

Utilities

Since utilities are essential for the operation of your rental property, you can claim these payments as tax deductions. It is still a good idea to lower these costs, but it can be difficult to control the amount you are paying in utilities if you cover your tenants’ utilities as well as the overall building utilities. You can even deduct any maintenance you do on utilities such as services to the HVAC system since it is a maintenance cost.

Professional services

If you hired a professional service such as a lawyer or property management company to help you with your rental, you can deduct these fees, even if their role was seemingly minimal. However, they are only eligible to be deducted if they helped with the day-to-day operation of the property. For example, if you hired lawyers to recover repossessed property, you will be unable to deduct these fees. If you hired a property management company to help screen tenants, you can deduct these fees from your taxes.

Travel

Depending on how far you live from your rental property, you can use the IRS’s standard mileage rate to deduct transportation costs and fees from your taxes. This does not apply to personal travel and travel for things not related to the operation of your property. Reasons you can receive a deduction for traveling to your property include screening a tenant or repairing your property. If you need lodging during your travel to your property, this can be deducted as well, so long as you are not taking advantage of this by staying at a five-star hotel.

General guidelines

As mentioned, be sure to hold onto any receipts or records of payments that you receive for the things are attempting to deduct as failure to provide these documents if you are audited can end up being a problem. Different states may have different tax laws, so be sure to know what tax deductions are allowed in your specific state. While you are able to deduct repairs and maintenance, you are unable to deduct improvements made to your property. Tax laws may also shift, so it is important to be on top of any changes that may occur so you can be sure you are not deducting things that are no longer allowed to be deducted. Consult with an accountant if you have any questions or doubts.

There are several tax-deductible items and services that apply to your rental property, and knowing which applies to you and your specific circumstances can help you save money on taxes.