Being a landlord comes with many financial responsibilities, but it also provides numerous opportunities to save money through tax deductions. Understanding these deductions can help you lower your taxable income and increase your rental property profitability. Here are ten common tax deductions that every landlord should be aware of:
Mortgage Interest
One of the most significant deductions for landlords is the interest paid on a mortgage for rental property. This includes interest on loans used to buy, improve, or refinance the property.
Property Depreciation
Rental properties lose value over time due to wear and tear. The IRS allows landlords to deduct this depreciation as a yearly expense, which helps offset taxable rental income.
Property Taxes
Property taxes paid to local and state governments are deductible expenses. Be sure to keep records of your tax payments to claim this deduction accurately.
Repairs and Maintenance
Routine repairs and maintenance, such as fixing leaks, painting walls, or replacing broken appliances, are fully deductible in the year they are incurred. However, major improvements must be depreciated over time.
Insurance Premiums
Landlords can deduct the cost of property insurance, liability insurance, and any other necessary coverage for their rental property.
Utilities
If the landlord covers utilities such as water, electricity, or gas for tenants, these expenses can be deducted. However, if tenants pay their utilities, the landlord cannot claim them.
Property Management Fees
If you hire a property management company like Majestic Management, Inc to handle tenant issues, maintenance, and rent collection, these fees are tax-deductible.
Legal and Professional Fees
Expenses related to legal services, accounting, and tax preparation specific to rental property are deductible. This includes lawyer fees for lease agreements or evictions.
Travel and Mileage
Landlords who travel to manage properties can deduct mileage, gas, and travel-related expenses. This applies whether you are showing the property, conducting maintenance, or meeting with tenants.
Advertising and Marketing Costs
Costs related to advertising your rental property, such as online listings, printed flyers, or real estate agent fees, are deductible business expenses.