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What Is A Rental Property Tax Deduction
Posted by Lorraine Ross on July 27, 2008|
The National Taxpayers Union writes that as many as 60% of all homeowners are over-assessed and not in line with their home value. (”How To Fight Property Taxes” 2004 p.1) |
A rental property tax deduction is any expense that evolves from owning a rental property. If you spent money to maintain, conserve and manage a rental property, you can use that as a property tax deduction. The most common deductions will be yard care, maintenance, repairs, insurance payments, cleaning and the mortgage payment if there are any. Some other property tax deductions that most people forget about are fees for an accountant, fees for a lawyer, expenses for finding renters, fees paid to rental agencies for finding you a renter, any mileage that is accumulated for said property and depreciation for items included in the rental and of the property itself.
Depreciation Of The Property And Items In The Rental Unit
The depreciation of items in the rental unit may include anything you supply to the tenant such as appliances, furniture, blinds, curtains and other items you might supply for a tenant. You can use these items by depreciating them accordingly. The property depreciation is usually done over a longer period. This is an area for your accountant to handle since they have more experience with depreciating items and properties. You want it done correctly and at the proper time.
Agency, Lawyer And Accounting Fees
If you use a lawyer or an accountant for your rental property, you will use the fees you pay to them as a rental property tax deduction. This is also true for any fees paid to a rental agency that you use to find and scan potential renters. All these fees are tax deductible. This is also true for any advertising you do yourself to find a renter or tenant. These fees are deductible on your taxes.
Mortgage Payments, Insurance Payments And Property Taxes
If you pay a monthly mortgage payment, you can deduct the payment on your taxes. You will also deduct your mortgage interest and property taxes in another area of the tax forms. The insurance premiums that you pay on the rental property are also deductible. This includes any special insurance you need for flood or other weather related issues.
All Other Rental Property Deductions
If you pay someone to do yard work or shovel snow, you van deduct it as a service rendered. For a cleaning service, you will deduct this as well. If you do any repairs or any type of maintenance on the property, you can deduct this as well. Remember to keep track of all the miles you drive to and from the property or to stores to get supplies for work done on the rental property, these miles or actually a percentage of them are tax deductible.
Because a rental home is just like a business, you are allowed many more deductions than if you were to just live in the house yourself. In some cases, this makes sense, but in some cases, it causes more paperwork and you have to keep the property in working order just as you do with any profitable business or you will lose your investment.
Nice article. I agree with the tax savings in rental property. Have you considered looking into the Go Zone? I am a builder out there and investor who purchase real estate and apply it as rental property get good tax incentives…may be something to look into. Check out our website at your convenience. Thanks
Good primer on rental property tax deductions. I agree that fees for the services of a professional often do get overlooked. Accurate record keeping and claiming all eligible deductions is crucial to the health of one’s rental property investments.
From what I gathered, this tax deduction law is for US only or is it practised worldwide?
Since you expect real estate prices to go down so much, does that mean that my Real Estate tax will suffer should expect much lower returns as well? Just wondering if I should lower my contributions to Real Estate or serviced office and/or transfer from my real estate fund to something else.
Love the post
This is one of the beauties of home ownership, especially investment property. Now is a great time to take advantage of owning an investment property. There are many good deals to be had with the downturn across most of the US.
This article was very informative. It helped me get a grasp on how to get the most benefits out of owning a rental property.
thanks i didnt realize there was so many deductions to take advantage of.
Can someone please explain how did the crash of real estate market happened without warning and ho fast will it recover. Also how did it reflect on “renting business”
I’m thinking about buying a property to rent but at the moment in the UK it’s not a great time, i suppose anywhere it’s not great.
Great post listing the possible tax deducations with rental properties. I think there are a lot of people out there that aren’t aware of these possible deductions.
Buying a property is over-rated. I have been renting for years and the credit crisis has not really effected me in any way.
The current economic situation the US faces has affected almost anybody globally, I believe. If owning a rental property offers so many tax incentives, then it is an attractive option. Some people are renting rather than owning their homes because of higher mortgage rates homeowners are dealing with.
Great articles ! It provides me with a lot of insights on the rental property tax issues. Especially on the rental property deduction and agency, lawyer and accounting fees. Thanks…
Thank you for the tip. I will be sure to claim as a deduction.
I agree with the article. See your property investment as a business. Anything that you do in the process of generating income is usually deductible from your income before you are taxed.
Forex Funnel, be fearful when everybody is greedy, and be greedy when everyone is fearful, said Buffet. And that is true. I talk to motivated sellers everyday. Willing to sell for 30-50% below market value. Now is the time to buy. Keep your eyes open for the motivated seller.
Dolf de Roos says… ‘the bargain of the year comes once a week’. And he proofed this by buying 52 houses in 52 weeks. Look up the book.
Great post. I’ve been thinking about trying to get into the real estate market with prices so low. It’s good to know I don’t have to worry about so many small things ruining potential revenue. Thanks for the info.
Depreciation Of The Property And Items In The Rental Unit
Good post Lorraine. Wow, I didn’t know there was so many deductions that I have been missing. Let’s hope my accountant didn’t forget them.
Great stuff. Can anyone point me in the direction of a UK site with similar info?
An excellent article, but I just wanted to point out one word of caution:
In one of my rental properties, my accountant wrote off new kitchen cabinets as rental business expenses, but she did it in a way that the state considered them to be “personal property” owned by my LLC.
This means that every year, I now have to pay taxes on those cabinets as “personal property” in addition to my property taxes.
Just a thought and something for you other rental owners & landlords might want to watch out for.
-A Fellow Landlord who doesn’t like taxes
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