As a landlord, you'll want to make sure you get all the tax breaks you can. There are more than just the obvious things to figure out. There are costs to break a lease, costs that renters can get back from the landlord, and many other costs. Make sure you're using all of your expenses to their full potential.
Interest. Mortgage interest payments on the loan to buy the rental property are deductible, but make sure you also deduct interest on loans for making improvements to the property and credit card interest on accounts you use to buy things or services for the property. Interest can be one of the biggest costs that a landlord can deduct.
Depreciation. Depreciation is a way that the cost of your property is paid back over time. You can claim depreciation over a 27.5-year period after the second year of ownership.
Repairs. You can deduct the costs of any repairs you make to the rental property in the year they are made. Some of these are painting, replacing broken windows, having leaks fixed by a plumber, putting down new flooring, and plastering walls. To be eligible, you must make sure that the expenses are normal, reasonable costs for running the rental property and not capital improvements.
Travel. You can deduct the cost of travelling to your rental property to collect rent, talk to renters about problems, attend meetings of a renter association, or make repairs. You can also deduct the cost of going to service providers like plumbers or electricians. If you're coming from a long way away, you can also deduct the cost of your hotel.
Office at home. If you use a room in your house as an office for your rental business, you can deduct that part of your own rent or mortgage.
Losses. You can write off any losses you have. Some of these are fires, storms, and floods. If you have insurance, you can only write off the part that isn't covered.
Insurance. Your property insurance premiums are tax-deductible. Most likely, you will have insurance for flood, fire, theft, and liability on the property.
Services. You can deduct any fees you pay for services related to the property. This includes attorney fees, accountant fees, payments to property management companies, payments to real estate investment advisors, and payments to other professionals who help you run your rental property well.
Some of the costs you may have, though, are not tax-deductible. You can't deduct a loss of rental income due to vacancy. Also, you can't deduct changes that are capital in nature, like a new roof, room additions, a new fence, etc.
