Eight Real Estate Tax Deductions to Improve Your ROI

Eight Real Estate Tax Deductions to Improve Your ROI

Paying taxes on your rental income is a fact of life. But if you hope to make money as a landlord you should work on maximizing your tax efficiency. Being thoroughly familiar with the tax code as it affects rental property can help you keep more of your rent and improve your return on investment. As the tax code changes from time to time, check with a tax professional on exactly what you can claim in any given year.

Interest

    If the property is mortgaged, you can deduct mortgage interest. You can also deduct interest on a home equity line that was used to improve the property and on credit cards that are used for rental expenses.

Taxes and Utilities

    You can deduct the cost of property taxes on your rental unit. If you pay the water bill or any other utilities, you should also keep track of these bills for tax time.

Depreciation

    Deducting depreciation can be complex, so check on what you are allowed to do in your specific situation. In general though, you are allowed to defray the cost of the property itself over 27.5 years.

Insurance

    You pay insurance premiums to cover your property in the event of fire and theft and perhaps flood. These premiums are deductible, along with any liability insurance that you maintain.

Repairs

    It's inevitable that you will spend money through the year to repair and maintain your rental property. Keep receipts from roof repairs, painting and gutter cleaning, as the cost is fully deductible.

Travel

    If you incur mileage or other travel costs in the discharge of your duties as a landlord, you can also deduct these. If the travel involves overnight stays, you can also deduct hotel or other lodging expenses. But be sure to properly document your costs and be prepared to prove the trip was legitimately connected to your rental business.

Home Office

    If you run your rental business from a dedicated room in your home, you can take the home office deduction. Be careful with this, though. The space can't be a corner of your bedroom; it has be a legitimate office space that's not used for any domestic purpose.

Professional Services

    As a landlord you may pay for running credit checks or preparing taxes or pay bank fees or management fees. Keep a record of these, as they are deductible.



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