Tax Tips for Rental Property

It’s that time of the year again–time to prepare the paperwork for tax time…Owning rental property gives the investor many more opportunities for tax deductions than owning that principal residence. Here are some of the great deductions you can take on your rental properties:

  • advertising for tenants and cost of signs
  • cleaning supplies
  • utilities–gas, water, electric, trash pickup
  • cost of insuring the property
  • cost of property management
  • maintenance payments–lawn care, gardening, pest control
  • cost of repairs–not improvements
  • mortgage and other interest paid on the property
  • depreciation of the property.

Depreciation means the property owner can divide the cost of the property, not including the land, by its depreciable life, which the IRS puts at 27.5 years and take that amound as a deduction. At sale, the property owner must include the depreciation for tax purposes, though, if the property passes to heirs, then the depreciation is never paid back.

Of course, some expenses cannot be included as deductions:

  • rental income lost due to vacancy
  • the cost of improvements which increase the value and/or extend the life of the the property
  • the cost of improvements which modify the property for a new use.

There are more deductions depending on your individual circumstances, such as traveling to visit far-away properties or…better consult your tax advisor or accountant.

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