Renting out a property comes with plenty of associated costs ranging from property maintenance and repair to the taxes and insurance you're required to pay for as a landlord. However, you have ways to save on these costs and enjoy the additional money in your pocket.
Many of the taxes you pay as a landlord are deductible. Discuss the details with a tax professional, but keep in mind these commonly missed deductions when you're ready to file your taxes.
- Interest payments:This includes any mortgage interest you pay as well as interest you pay on debt created to improve your rental property or to purchase items you need for your rental. Loan interest and credit card interest qualify for deductions as long as you bought items or paid for services specifically for your rental.
- Repairs: The cost of repairs you make to your property can be deducted at tax time. When you repair the roof or air conditioning unit, or make any other fix to the property, hold on to receipts and invoices so that you can provide documentation when you claim the repairs.
- Travel:Both local and long-distance travel can be deducted from your tax bill. Locally, you are entitled to either travel expenses such as gas and repair for the vehicle you drive to visit your rentals or you can claim mileage at the current IRS-approved rate. If you live a long distance from your rental property and make visits to the area to check on it or to handle issues as they arise, you can deduct your travel expenses as well. Hotel, airfare, meals and other travel costs are deductible. Make sure to keep all receipts and proof that you were in town working with your rental.
Insurance is available to protect assets and help you get back on track when something out of your control causes damage to your property. Be mindful of the type of insurance you get and how often you use it in order to spend the least amount possible.
- Try not to make claims: If the property sustains catastrophic loss or damage, make an insurance claim. When small damage occurs, consider paying to fix or repair it yourself instead of filing with your insurance company. The more times you file claims, the higher your premiums can become. Keep claims to a bare minimum to save on premium costs.
- Choose a high deductible:In the event of loss or damage to your property, you want a deductible you can afford. That being said, the higher the deductible, the lower the insurance premiums. Consider the highest amount you can afford in the event you'll need to deal with replacing or repairing your rental property and let that be your deductible.
- Consider grouping policies: You'll need to discuss this with your insurance agent, but there may be discounts available if you group multiple policies together. Grouping policies could mean multiple rental property policies bundled together or car, life and property insurance grouped together. Understanding the different tax deductions may mean the difference between a high tax bill or no tax bill at all. Asking the right questions and using your insurance wisely can save you money on your annual premiums. Do your homework and talk to the professionals to save on taxes and insurance each year.