Top 15 tax deductions for landlords

Top 15 tax deductions for landlords

Before claiming any of these deductions, be sure to have detailed and thorough records to back them up. I recommend tracking your expenses as you make them. Trust me, your tax prep will be much more manageable if you’re organized throughout the year.

1. Loan interest/points

If there is a mortgage on the property, the loan interest will probably be your single largest deductible expense.

• Mortgage Interest (primary & secondary)
• HELOC Interest for loans used to repair or improve the property
• Credit card interest on items used for the property
• Mortgage Points to purchase or refinance a rental property

Keep in mind, you can only deduct interest on money that was actually spent on your rental business. Therefore, you wouldn’t be able to deduct the interest of a withdrawn line of credit that is sitting in your bank account.

2. Depreciation of assets

There are, in general, three types of costs you need to capitalize and depreciate:

• The value of the structure, not the land
• The value of improvements – such as appliances, carpet, windows, counter-tops, etc.
• Equipment/Computers/Laptops

These expenses cannot be deducted in a single year, but rather must be spread out (depreciated) over multiple years.

3. Taxes

Often the real estate taxes are paid through the mortgage company, and therefore show up on the Form 1098 that is sent from the bank.

If the property is free and clear of any mortgage, CONGRATULATIONS!, but you’ll have to look up your tax records online if you didn’t keep receipts of those payments. Other business-related wage taxes, permit fees, or personal property taxes are considered allowable deductions as well:

• State, County and City Taxes
• Social Security Taxes for Employees
• Medicare and Unemployment Taxes for Employees
• Personal Property Tax/Vehicle Tax
• Permit Fees/Inspection Fees

4. Repairs

Repairs are defined as any effort to maintain the current condition of a property or asset.

• Painting/Spot Patching
• Plumbing Repairs
• Air Conditioning Repair
• Fixture Repairs
• Labor Costs/Contractors
• Incidentals related to a repair
• Rental Fees for Tools/Equipment

5. Maintenance

Maintenance costs are often confused with repairs, however with maintenance, you’re not necessarily fixing anything. For example, the lawn will always need to be cut but it is never really “broken.”

• Landscaping and Tree Trimming
• Homeowner Association Fees
• Pool Cleaning, Chemicals and Maintenance
• Pest Control and Treatment
• Tune-ups on Lawn Mowers, Chain Saws, Leaf Blowers, etc.
• Light Bulbs
• Smoke Detector Batteries
• HVAC Filters
• Janitorial Items

6. Insurance premiums

All business-related insurance premiums are tax-deductible. When trying decide if the insurance is business related, I ask myself, “Would I buy this insurance if I didn’t own a rental?”

• Homeowners Insurance
• Mortgage Insurance Premiums
• Fire/Damage/Liability Insurance
• Flood Insurance Riders
• Theft Insurance
• Workers’ Compensation Insurance
• General Liability Insurance
• Personal Umbrella Insurance

7. Utilities

You can deduct the cost of any rental property utilities that you pay for. You are still allowed to claim utility expenses even if the tenants reimburse you later, but you also have to claim that reimbursement as income.

• Electricity
• Gas
• Heating Oil
• Water & Sewer
• Trash & Recycling

8. Travel expenses

According to a recent survey by Cozy, 50 percent of American Landlords do not live near their properties. Any long distance travel to visit your assets or to conduct rental business can be tax-deductible as a business expense.

• Airline Fares
• Car Rentals and Taxis
• Hotels
• 50 percent of meal expenses during long-distance travel

9. Vehicles

When expensing business vehicles, the actual asset must be depreciated over multiple years, however the upkeep can be deducted in the year the expense was incurred.

• Business Vehicles (depreciable)
• Mileage or Gas/Maintenance/Usage of Business or Personal Vehicles

10. Management fees

• Property Management Companies
• Individual Property Managers
• On-site Manager
• Condominium Association Fees
• Special Assessments

11. Legal and professional fees

If you need to hire a pro, be it a lawyer, accountant or tax professional, you can expense the cost. If you ever have to evict a tenant, you can expense all reasonable court and filing fees.

• Accounting Advice
• Professional Tax Preparation
• Tax Preparation Software 
• Structural Engineering and Consulting
• Legal Fees
• Lease Review and Editing
• Court Filing Fees

12. Office/operating expenses

You have to work somewhere,  maybe a spare bedroom?  Some landlords actually rent commercial office space.

• Ink & Printer Paper
• Pencils, Pens, and Staples
• Rental Software 
• Legal Forms
• Rent Paid for Office Space
• Square Footage of a Home Office
• Phone Bills

13. Advertising

• Radio, Newspaper, Online Ads
• Signs and Banners
• Ads in Phone Books
• Printing and Postage for Mailers
• Professional Photos

14. Commissions

• Commissions to Managers and Salespeople
• Commissions for Tenant Referrals

15. Start up expenses

Any expense that would be deductible as an operating expense by an ongoing business is a start-up expense when it’s incurred before a business begins. Unlike operating expenses, start-up expenses cannot automatically be deducted in a single year. This is because the money you spend to start a rental (or any other) business is a capital expense—a cost that will benefit you for more than one year.

The maximum allowable deduction for start-up expenses in the first year is $5000.