Introduction

Tax savings is one of the greatest benefits of the rental property ownership. The IRS also allows landlords to deduct numerous expenses that have a direct effect of cutting down taxable income such as mortgage interests to maintenance costs.

The trick however is in the fact that many property holders fail because they are not aware of what should qualify. That is why Property Advantage has developed this deductions checklist on rental property so that you can receive more of your hard earned income and still keep within the taxation regulations.

Why Rental Property Deductions Matter

Rental income is taxable, but the IRS also recognizes that property ownership comes with expenses. By deducting eligible costs, you can:

• Lower your taxable income
• Boost your net cash flow
• Maximize long-term returns

Rental Property Deductions Checklist

Here are some of the most common write-offs every landlord should know:

1. Mortgage Interest

For most owners, this is the largest deduction. Interest paid on loans used to purchase or improve the property is fully deductible.

2. Property Taxes

State and local property taxes can be deducted each year.

3. Insurance Premiums

Landlord insurance and liability coverage are deductible expenses.

4. Repairs and Maintenance

Repairing a leaky faucet, a broken window or maintaining the HVAC system are all deductible. (Depreciation however is made over time in the case of upgrades or improvements.)

5. Depreciation

The IRS enables you to deduct the cost of the building (not the land) in 27.5 years yielding you a tax-saving non-cash benefit.

6. Professional Services

Fees paid to accountants, attorneys, or professional property managers are deductible.

7. Utilities (If you pay them)

If you cover water, electricity, or gas for the rental, those costs are deductible.

8. Travel and Mileage

Trips to inspect the property, meet contractors, or collect rent can be deducted, whether it is a local mileage or longer travel.

Record-Keeping Tips

Tax benefits are only useful if you can prove your expenses. To stay organized:

• Save all receipts and invoices
• Track mileage with an app or logbook
• Keep a separate bank account for rental property income/expenses
• Use accounting software to categorize deductions

When to Seek Professional Help

The power of deductions notwithstanding, tax laws are sometimes very complex. The appropriate CPA to do that is somebody that has real estate experience and a bit of knowledge regarding deductions that would ensure that you get the greatest number of deductions without breaking audit risk.

A property management company also helps in preparation of the detailed financial statements of the end of the year therefore the tax season is a lot less hectic to you.

Conclusion

Way of increasing your returns on investments that can be made are rental property deductions that can be made. Through monitoring costs, keeping orderly and making all the possible write-offs, you can save a lot of taxable income and maintain more profit in pocket.

Prepared to take the best out of your rental property? Get a Free Rental Analysis by the Property Advantage team and discover how being an owner can be an easy task with professional management.