An Owner’s Guide to Rental Property Tax Deductions

One of the primary advantages of owning Grand Prairie rental properties is that, come tax time, you can take benefit of deductions that other taxpayers cannot. Yet, to benefit from these deductions, it is imperative to know what they are and how to have your numbers ready before you continue filling out your return. In this guide, we will evaluate the tax deductions that rental property owners may use and how they can help reduce your tax liability yearly.

Common Expenses You Can Deduct

Having a complete awareness of your property’s common expenses is imperative to optimizing your cash flows. It can also assist you at tax time since you can deduct most of them on your return. Budget expenses that are also tax-deductible include:

• Repairs and maintenance. Anything you pay out to maintain the condition of your property is normally a deductible expense. This includes fees paid to service providers, contractors, and so forth. You need to understand that improvements – particularly significant ones – are not deductible as expenses. So they should be amortized as capital improvements instead.
• Insurance. Insurance premiums for your landlord insurance policy, including any fire, flood, or personal liability insurance, are deductible expenses.
• Utilities. You can deduct utility payments on your tax return if you pay for any utility service, including water, garbage, electric, or gas. Utilities paid by your tenants are not deductible.
• Advertising. Any money you spend to market your property and/or find a new tenant is a deductible amount. This includes if you spend on a web domain or website hosting, online ads, and professional fees for photography or video tours.

Additional Tax Deductions

In addition to common expenses, there are a handful of other deductions that rental property owners can take to help reduce their tax liability. These tax deductions are:

• Mortgage interest. Any mortgage interest you pay on related loans is tax-deductible for investment properties. This is often one of the most significant deductions for rental property owners.
• Depreciation. Another excellent deduction that rental property owners may utilize is depreciation. Most properties tend to depreciate over time due to wear and tear. The good point is that you can deduct a certain amount for this depreciation over the life of the property. You can also get depreciation on capital improvements, such as appliances, fences, and renovations.
• Legal and professional fees. Just as you would deduct expenses paid for repair work or landscaping, you can also deduct the cash paid to attorneys or other professionals who deliver services related to the management of your rental property. Many costs associated with eviction, Grand Prairie property management, and tax preparation are also deductible.
• Travel. Owning rental properties generally includes a number of back and forth travel, whether you stay in another state or only a few miles away. Those business-related miles can gather together over a year and are deductible on your tax return. Just keep a log of your travel miles and any other travel-related expenses.

To take full advantage of all the deductions granted to you, you have to keep your property-related expenses organized and in one place. And there’s no reason to wait until the end of each year; you can start keeping track of your expenses immediately and add as you go along. Doing it this way might accomplish your work easier yearly when tax season comes around.

 

Another method to make tax time easy is to partner with Real Property Management Meridian to check on your operational expenses constantly. Besides professional property management, we keep track of your property’s income and expenses and provide reports that can make tax time much more uncomplicated. Contact us online to learn more!