May 25, 2024


Mad about real estate

If I Own Rental Property, What Deductions are Available to Me?

As a rental property owner, your real estate actually gets more deduction benefits for tax purposes than nearly any other investment, but it will become meaningless if you do not make full use of what’s available to you.  There are not too many people who make an investment in rental property to take a loss, and taking full advantage of available the deductions can actually make a difference in you making a profit.

There are ordinary, reasonable and necessary expenses to manage, maintain and conserve a rental property and these expenses are tax deductible.  Owners or rental properties can deduct:  Newspaper advertising and sign costs, supplies for cleaning, real estate taxes, interests such as the mortgage paid on the property, flood, fire, liability or some other type of hazard insurance, payments for lawn maintenance, control of pests and trash collection, maintenance on the rental property, costs for new locks and keys, any commissions paid for finding new tenants, transportation to and from the rental property in order to manage or maintain it and rent collection (in case you use a personal vehicle, do keep track of all expenses and mileage).  You can also make deductions for property (excluding land), appliance, furnishing and home improvement depreciations.   If you have incurred court costs in trying to evict tenants, you may claim a deduction, but you cannot deduct any loss of rental income due to vacancy.

In any event, there is quite a list of reasonable deductions that you can make.  When it is all added up, you can end up with quite a different tax return than if you were to ignore possible deductions.  You should know the impact on your personal tax return if you are the owner of rental property.  You must report rental income on your income tax return and you can deduct the associated expenses delineated above from the income you earn through your rentals.  The above mentioned list is by no means definitive or exhaustive.

You can make deductions for employees or contractors when you hire anyone who is to perform a service involving your rental property.  For example, you can deduct wages as an expense for your rental business.  In addition, you can deduct long-distance travel, not only local travel.  If you have to make an overnight trip as part of your rental business, airfare, lodging, meals and other expenses are deductible.  However, you must keep immaculate records regarding your overnight travel deductions because the IRS looks very closely at these deductions.  You do not want to claim an overnight travel deduction without all the relevant paperwork to prove that your trip was related to your rental business.

There are also theft losses and casualty deductions.  Sudden events such as fires or floods can get you a deduction if your rental property is damaged or destroyed.  The amount of your deduction will depend on the amount of property destroyed and if it was insured.  Talk a competent accountant and find out what deductions are actually available to you and you may get a welcome surprise when tax time comes around.  And please make sure that you have all the relevant documentation in case the IRS decides to take a look at your rental business.