Property Management, Real Estate

Valuable Tax Write-Offs for Landlords

When you own a property that you rent out, you are a business owner who’s in the business of providing valuable space for tenants. As a result, you’re entitled to a variety of tax benefits to lower the cost of running your business; if you’re not claiming these, you’re losing money that could fit snugly in your wallet! One of the advantages of employing the services of reputable property management companies is their wide variety of resources; they can help you better understand what tax write-offs apply to you, as well as point you to information and resources that will help you save money.

Interest is one of the most valuable write-offs for rental property, and there are several different types of interest that are tax-deductible. You can deduct interest on loans to improve your rental property, including interest from credit cards used to acquire goods and services for rental property improvement. It’s important to keep in mind that this rule does not apply to the principle; deductions on the principle are taken through depreciation instead.

The cost of minor improvements and repairs, like fertilizer for your lawn, can often be deducted from your taxes as a business expense; larger, longer lasting purchases, however, are considered capital assets. Capital assets, like a newly purchased property, cannot be deducted from your taxes the year you purchase them. However, because these assets are long-lasting, they can be expected to depreciate in value over time. Your land does not depreciate, as owning land is always valuable, but the buildings on the land and the items inside (flooring, stoves, etc.) do. Rental properties can usually be depreciated over the course of 27.5 years; each year, you can deduct about 1/27th of the building’s value from your taxes.

Activities required for the maintenance and upkeep of your rental property can also be deducted. This includes travel expenses, like gas and repairs to your vehicle, when you are conducting activities typical of your duties as a landlord (repairing your property, handling tenant complaints, etc.). These expenses cannot, however, be deducted for travel made to improve the property, as property improvements fall in the realm of capital assets. You can also deduct the expenses for professional services essential to the upkeep of your rental property; the services of plumbers, landscapers, and HVAC technicians can all be deducted, so long as they are not doing work to improve the property.

You can also deduct expenses for financial and professional services you might receive. You’ll be able to deduct the insurance you have to purchase for your property; if you have employees, their health and worker’s compensation insurance premiums may also be deductible. Accountants, lawyers, and yes, even property managers are considered professionals in the world of landlording, so you can deduct costs from hiring these folks from your taxes. It’s to your advantage to use these service providers to maximize the value of your investment.