Investing in rental property can be an excellent choice for property owners seeking larger deductions and tax benefits. The Internal Revenue Service (IRS) allows rental property owners to deduct the expenses involved in rental operations from taxes, including maintenance, management, and other expenses.
In this article, you will have a list of real estate tax write offs for US rental property owners.
Real Estate Tax Write Offs – In-Depth Review
Consulting with an experienced Certified Professional Accountant can be the difference between earning a profit on rental property and losing money in both the short and long terms. Here’s a review of the tax deductions and benefits rental property owners can seize advantage of.
Costs with Maintenance & Repairs
As long as the rental property owner can prove the costs with maintenance and repairs were strictly necessary, ordinary, and reasonable in amount, the Internal Revenue Service (IRS) allows a full deduction in the year in which they were required.
Good examples of deductible costs on rental properties include repainting walls, fixing water leaks, repairing windows, plastering, and fixing floors.
Property Depreciation
While the cost of a rental property is not fully deductible in the year of the purchase, it is possible to deduct a portion of the structure’s cost as “depreciation.” This cost can be deducted each year.
Mortgage Interest
Many rental property owners rely on mortgage loans. While the interest of a mortgage loan generally represents the largest tax deduction a landlord can file for, it is also possible to file deductions on the interest of home improvement loans.
In some cases, it is possible to file for a deduction on credit card interest for property-related expenses.
Losses Associated with Casualties or Theft
The IRS allows rental property owners to deduct losses incurred by natural disasters, thefts, or casualties like a fire from the due tax amount. The owner may file for a tax deduction for the entire or partial amount of loss.
The percentage of the deduction varies according to the extent of damage caused to the property and the existence of an insurance policy covering the property.
Insurance
Whether a property has insurance also impacts its owner’s tax deduction plan. It is possible to deduct the amount paid in insurance premiums from the tax burden associated with a rental property.
For property owned by a company with employees, it is possible to deduct the cost of health insurance and workers’ compensation insurance.
Traveling Costs
Owners of rental properties who need to travel to manage the premises or any other rental-related activity can deduct the costs with travel. Examples of deductible costs include costs incurred by meeting with prospective tenants, conducting market research, or trips to purchase materials for maintenance and repairs.
Rental property owners traveling long distances for rental activity may also deduct costs with plane tickets, lodging, meals, and other expenses. It is fundamental to document the travel expenses carefully, as IRS auditors tend to over-scrutinize this type of deductions – especially if there is no solid documentation to back them up.
Employees & Contractors
Rental properties with trade or business status need employers and contractors to perform services on them. In such cases, it is possible to deduct expenses with personnel.
Professional Services & Legal Fees
Owning and managing rental properties is not an easy task. Hence, rental property owners may often need to rely on the guidance of professionals like CPAs, attorneys, or real estate investment advisors to help them in the mission.
When filing taxes with IRS, it is perfectly possible to deduct the fees paid to these professionals as part of the operating expenses.
Find the Best Tax Deduction Strategy for Your Case – Immediately Contact an Expert CPA
If you want to save money on taxes and guarantee full tax compliance, call Edward D. Quilca, CPA at (786) 310-5582 or email [email protected] to find a tailored solution for your case.
