Tax Deductions for Landlords

One of the biggest benefits of owning a rental property is that you can deduct expenses that are nondeductible for personal residences. With personal residences, the only deductions that owners are entitled to are real estate taxes and mortgage interest. However, with a rental property almost any expense related to the rental property is deductible.

Here are some of the areas where you can expect deductions:

• Repairs and maintenance costs; provided the repairs are ordinary, necessary, and reasonable in amount. This includes everything from light bulbs to new windows.
• House cleaning in between tenants. If you hire a cleaning company to clean the unit after somebody moves out; those costs are deductible.
• Maintenance for empty rentals; you still have to take care of them even when they are vacant.  
• Advertising! Yes, the money you spend on advertising your rental to attract tenants is tax-deductible.
• Wages and fees. Any money you pay to anyone who reasonably helps you maintain or manage your property.
• Local travel expenses. Anytime you drive to anywhere for an activity related to your rental (i.e. going to the hardware store to purchase a part for repair), you can deduct your travel expenses.
• Rentals for your rental. If you rent things for your tenants to use or to help you maintain your property, those expenses are deductible. This would include things like furniture or appliances or laundry machines.

Other items on the list might include things like property taxes, insurance premiums, cost of travel to collect rents or cost of travel for maintaining the property, utilities that you provide to your tenants, a telephone that you use exclusively for managing your rental property, losses from theft or loss of property due to an unexpected or unusual event. And last but not least, you can deduct the amount you pay to have your taxes prepared.

Of course it is always a good idea to involve an accountant when talking about tax information and rental properties. The IRS publishes a lot of information for free, but some of it can be challenging to understand. One other item to note, don’t expect the government to just hand over this money. You have to be prepared to prove it all with detailed documentation that you keep separate from all your other tax papers. You can save yourself from end of the year tax panics by documenting every expense as you incur it.