What Expenses are Tax-Deductible for Landlords?
Being a landlord for a rental property can sometimes feel like a full-time job, if it isn’t already. On top of your own expenses in your own home, you’re tasked with mortgages and property taxes for any rental properties you own. Come tax season, you might be wondering what expenses are tax deductible for landlords - the IRS states that the deductible expenses must be ordinary and generally accepted in the rental business, but are also necessary for maintaining and managing the property. You should always consider working with a tax professional to help you see which deductions you qualify for.
Generally, when houses are purchased, either for you or as a rental property, you use a mortgage. Loan interest can be the largest tax deductible expenses for landlords. You can also deduct any origination fees for purchasing or refinancing the loan, as well as interest on unsecured loans and credit card interest for purchases that you’ve made for your rental property.
Almost every local government collects property taxes. Check your escrow summary to find the exact tax rate in your area for tax deductions. You’re also able to deduct landlord or vacation rental license fees, occupancy taxes, and the sales tax on business-related items, inspection fees, and social security and wage taxes for employees.
Wear and tear happens to even the best renovated houses, and can lower the value of your rental property. The depreciation can be deducted, and can be taken for the life of the property - as long as it’s spread out over the multiple years. You can also claim depreciation deductions on the equipment that helps you run your rental property business, such as your computer, vehicle, and any improvements you make to extend the rental property’s life.
Maintenance & Repairs
General home improvements are a tax deduction, but certain tax codes allow you to deduct some maintenance and repair costs as well. The goal of these costs is to keep the rental property in rentable condition, but don’t add significant value to the home. This accounts for painting, cleaning HVAC filters, landscaping, and pest control.
Legal & Professional Fees
Another area of deductible fees is professional fees like legal and tax preparation fees. If you needed to hire a lawyer to look over rental paperwork, or a real estate agent to list your property, you could deduct those fees - including ad space you’ve paid for to list the property. This comes in handy if you need to evict your current tenant because you can write off the legal and court filing fees.
Travel & Transportation
When you manage multiple rental properties, you could find yourself driving around all day to those properties, including traveling to show the property, collect rent, and maintenance needs. Your travel expenses, such as actual expenses like tolls or the standard mileage rate, are deductible.
Whether your office is in a commercial building or the spare room in your house, you can deduct the costs of office space. Square footage of the space will be the largest expense, but you can also deduct supplies, like ink, computer software and equipment, or anything else you need to get work done.
For more information on what expenses are tax deductible for landlords, contact Renovo today.