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Tax Deductions for Landlords & Real Estate Investors

Owning rental property allows landlords and investors to take advantage of some pretty exciting tax deductions.

 

With the 2017 tax deadline quickly approaching, you need to make sure you understand all the options available to rental property owner that will reduce your tax burden.

 

Tax Requirements of Rental Property Owners

 

If you own rental property as a landlord or real estate investor, you must report the collected rental income as collected income to the IRS. Rental income includes all amounts you receive as rent from residential occupancy of your properties.

 

Rental income includes any money collect related to your property throughout the tax year. This includes advanced rent, regular rental payments and fees from tenants, like a pet fee, landscaping fee or parking fee.  

 

Security deposit fund are not included in your tax return. Only include security deposit money as taxable income if you keep a portion of the deposit according to your lease terms.

Learn more: Rental Income and Decutions - Tax Tips for Landlords

 

Rental Property Tax Deductions for Landlords

 

The following list of landlord deductions is provided by the IRS to help investors at tax time minimize their tax burden.

 

As you begin a new year, or prepare your taxes from the preceding year, make sure to keep excellent records of the following tax deductions available to landlords come tax time. The only way to make sure you are maximizing your tax deductions is to maintain proper records of all your expenses.

 

  • Home Office  - Landlord can claim a home office deduction if they use part of their home for their landlording business.



  • Repairs - Routine repairs and property maintenance preformed on your rental property are deductible.



  • Maintenance - Maintenance includes performing routine and preventative services to maintain the condition of your property, like annual HVAC services, chimney cleaning, or replacing air filters.



  • Mileage/Travel - A landlord can deduct travel expenses for rental related tasks like driving to your property for repairs, inspections, showings, turnover, etc.



  • Utilities - If you pay any utility bills on the property, these are deductible.



  • Taxes - In general, landlords may be able to deduct property taxes (if your property is mortgage free!), business related wage taxes, permit fees/inspection fees, and state, county, and city taxes, and personal property tax as it relates to your rental business.



  • Insurance - Insurance premiums for your rental are deductible.



  • Interest - In general, individuals may deduct interest on money borrowed for a business or investment activity, including being a landlord.



  • Depreciation - While the actual cost of a rental property is not fully deductible, landlords can deduct a portion of the cost of the property over several years for depreciation. Landlords will also find that money spent to improve the property is depreciated as well.  



  • Operating Expenses - Purchases made for supplies or subscriptions used for managing your rental properties are tax deductible.  This can include office supplies like pens, paper, ink, legal forms, or management books.  And also subscription based services like phone bills or web-based property management software.

 

How do I report Rental Income and Expenses?

 

According to the IRS, landlords normally report rental income on Form 1040, Schedule E, Part I. List your total income, expenses, and depreciation for each rental property on the appropriate line of Schedule E. See the Instructions for Form 4562 to figure the amount of depreciation to enter on line 18.See Publication 527, Residential Rental Property, for more information.  



Make sure to speak with your tax professional if you have any questions or concerns about the tax opportunities available to rental property owners.

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