Whether you're new to the business of owning income property or an experienced hand, you may be losing money by missing out on key tax deductions. Here are 10 key deductions that no landlord should overlook:
- Interest: Just as with your personal residence, you can deduct any interest paid on loans used to fund the purchase of income properties. In addition, you can deduct credit card interest for purchases related to the upkeep and repair of your rental property.
- Advertising costs: As a landlord, you take tax deductions for any expenses related to filling vacancies.
- Property upkeep expenses: As the owner of a rental business, common expenses related to the upkeep of your income properties, such as trash removal, landscaping, HOA fees, and other maintenance costs, can be subtracted from your income.
- Reasonable repairs: While it should be noted that "nice to have" upgrades don't fall into this category, any expenses related to necessary repairs---from replacing an aging roof to fixing a leaky faucet---can be deducted from your tax bill.
- Professional services: Legal expenses, accounting fees, broker commissions, and other professional fees, are acceptable deductions.
- Insurance premiums: Landlord insurance typically costs 15 to 25 percent more than standard homeowners' insurance, depending on the level of coverage you choose, but it's a deductible expense.
- Expenses related to being self-employed: From your home office expenses to your health insurance premiums, there are many tax deductions available to you as a self-employed business person. Phone and internet, vehicle expenses related to business travel, as well as any business-related taxes you pay are also covered.
- Depreciation: As your rental property, and the various mechanical systems and appliances it contains, ages, you can claim it's depreciation as a deduction. Typically, you divide the total value of a rental property by 27.5 years to figure out the yearly deduction you can take.
- Employee salaries and related expenses: If you hire employees to help you run your business, you can deduct their wages, social security contributions, health insurance premiums, and other expenses, from your tax bill.
- Property management fees: If you choose to hire a property manager to maintain your rental properties and manage tenant relationships, his or her fees are fully tax deductible.
For complete information on tax deductions for landlords, visit IRS Publication 527.