Deductions for Rental Property

If you own a rental property, then you're going to have certain tax obligations that must be fulfilled every year. To make sure that your costs and income are appropriately tracked, you'll have access to a series of deductions that apply to your rental property. This is especially important if you spend more than 50% of your time as a real estate professional, because any losses you receive are fully deductible against all of your income. Otherwise losses are passive and can only be deducted up to $25k of your rental income – unless you make more than $100k, where these losses began to phase out.

Any passive losses that you cannot claim in one year, however, will carry over to the next year and can be done so almost indefinitely. Do you spend more than 750 hours on your rental properties and work on property development as your career? Then your losses may be non-passive. Here are some other deductions to consider.

Some Repairs Are Deductible

Not everything you do on your rental property is considered a deductible expense. If it is a repair that is being made, such as patching a hole in the wall or repairing a broken toilet, then this cost is considered a deductible expense. Painting may be considered deductible if the purpose was to repair an existing room. Painting may depreciate, however, if it was done to improve the interior conditions of the home.

Travel Expenses May Be Deductible

If you need to travel in order to fulfill your duties as a landlord or a property manager, then some of these expenses may be deductible. This includes going to your property in order to maintain it or to collect rent. If you went to improve your property, however, then this expense can only be recovered through the depreciation schedule that matches up with the specific improvement that was being made. You can either choose the standard mileage rate or the actual costs for the deduction.

Some Of Your Common Expenses Are Deductible As Well

One of the most overlooked deductions is the preparation fees that were used to pay for a professional to prepare your income and deductions for you. Other expenses that can be deducted include your property tax levies for the year, insurance costs that you may need to pay, and even the lawn care that happens on your property. Don't confuse lawn care with landscaping services, however, because the latter is an improvement and would depreciate.

Special Dues May Also Be Deductible

If your property is in a home owner's association or you need to pay dues because you're taking care of property that is commonly owned, like an elevator, then these expenses may also be deductible. Expenses for cooperatives that you may need to pay may also be deductible under specific circumstances.

It is important to remember that a rental property owner can only claim deductions for expenses that they actually paid out. If a tenant painted a room, then the tenant would get to claim the deduction for the expense, not the property owner.

Keep these tips in mind as tax season approaches and you'll be able to deduct your expenses appropriately and pay the right amount of taxes. That's a good thing because you don't want to overpay... and if you underpay, you may be subject to fines and penalties.
Posted on Oct 07, 2014


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