Can You Deduct Mortgage Interest on a Rental Property

Paying more for a rental property than you should is one of the nightmares of being a landlord. Unfortunately many rental property owners are paying more in taxes than they should be every year. That's because there are more deductions at tax season for a rental property than almost any other investment that could be made.

You can deduct mortgage interest on most rental properties. Any loan that is used to acquire a property qualifies for a tax deduction. The interest deductions don't just stop there, however, because there are more deductions to take. Credit card interest that is paid on charges for rental activities and interest on property improvement loans are both deductible as well.

Here are some additional deductions that are also widely overlooked by landlords today.

1. Local Travel

Whenever you drive somewhere to take care of rental activities, you have a tax deduction that can be used. If you need to drive to your property to handle a tenant complaint or oversee a repair, you can either deduct the actual expenses or take the standard mileage rate. You'll need to save your receipts or log your odometer miles, but it is definitely worth the increased responsibility.

2. Repairs and Maintenance

As long as the repair is an ordinary, necessary repair, then it qualifies for a tax deduction. You can deduct plumbing charges, cleaning charges, and other basic tasks that don't improve the value of the home. This means you can't take a deduction on the new painting or carpet that just got put in, but you can deduct the charges for cleaning the moss off of the roof.

3. Independent Contractors

If you hire someone to take care of your rental property, then their wages can be logged as a business expense when tax season rolls around. The only exception to this rule would be if you hire an independent contractor to do work that would qualify as a property improvement instead of a repair, like the carpet installation team.

4. Home Offices

If you run your business out of your home, then you will likely qualify for a home office deduction. What is often overlooked, however, are places where you might conduct business for a fraction of time, like your workshop. Any place on your property where you manage your business can qualify for a deduction. This applies even if you rent your home instead of owning it.

5. Insurance Premiums

Almost any insurance premium you pay for your rental property can be deducted on your taxes. This includes flood insurance in addition to your general liability, theft, and fire premiums. If you've got employees, then any insurance premiums you pay for them are also deductible.

6. Legal or Professional Services

When you need to hire someone to help you take care of a professional service, those fees are also deductible. This includes an accountant, attorneys, or even a property management company. As long as the fees relate to your work activities, they are fully deductible.
Posted on Nov 04, 2014


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