10 Rental Property Tax Write-Offs You'd Be Crazy to Ignore

Rental property tax deductions reduce the amount of income tax you pay on your rental income. They're a good thing. And because they can save you money, you shouldn't ignore them. In fact, documenting your rental expenses and deductions should be a regular and habitual part of your rental business. If you don't keep current records of your expenses, starting tracking them today so you're not scrambling at tax time to recreate 365 days worth of deductions.

The Most important Rental Property Tax Deductions From Which You Can Benefit

#1: Interest on Your Rental-Related Loans

It's important to make the distinction between principal and interest. You cannot deduct the amount of the loan (the principal). You can, however, deduct the interest on the loan that you pay in any given year. Typically, as a rental owner, you'll have some of these deductible interest expenses:

• Interest on loans to buy your rental property (look for the Form 1098 from your lender each year)
• Interest on loans to refinance your rental property (ditto: Form 1098)
• Credit card interest for goods and services bought for the rental property
• And don't forget about personal loans for things related to the rental property

#2: Travel Expenses

If you have any travel expenses related to your rental property, such as transportation, lodging, and meals, they're fully deductible. Also, if you use your personal vehicle in your rental property business, you can use one of two methods to deduct your related expenses: use the standard mileage rate or actual expenses. The IRS provides travel expense-related information in Publication 463.

#3: Repairs & Maintenance

A repair is any work that restores the property to its original condition. Reasonable and necessary repair costs for your rental property are tax deductible. Maintenance doesn't always involve fixing something that's broken, but it gets to the idea of keeping the property in its original condition, and in the long run a regular maintenance program could save you on emergency repair costs. Deductible maintenance expenses include the following:

• Landscaping
• Light bulbs, smoke detector batteries, HVAC filters, etc.
• Pest control
• Cleaning supplies

#4: Depreciation

Depreciation is a process through which you deduct long-term assets (assets you hold for more than one year) over many years. Long-term assets include rental buildings. Land is not included. Tangible personal property that lasts for more than one year, such as carpeting and kitchen appliances, can also be depreciated. Because depreciation can be very complicated, it's best to discuss it with your accountant. And if you want more information, Nolo.com describes depreciation in more detail.

#5: Insurance

Insurance premiums, including those for landlord liability, theft, fire, and flood, are tax deductible.

#6: Taxes

Real estate taxes, property taxes, and state, county, and local sales taxes are deductible.

#7: Home Office & Office Supplies

Many landlords don't take advantage of the home office deduction, because quite frankly, it's a bit of a pain AND the IRS tends to closely scrutinize this one. However, if you use an area of your home exclusively for your rental business, it might be exploring with your accountant. In addition to deducting for your home office, you can also deduct for office supplies used in carrying out your rental business. Deductible office supplies include writing implements, paper, notepads, printer ink, envelopes, and stamps.

#8: Utilities

If you pay any utilities for your rental property, you can deduct them. These include the following:

• TV/Cable/Internet
• Electricity
• Gas
• Garbage/Recycling
• Water & Sewer

#9: Professional Services

If you need to hire a lawyer, accountant, or other professional, that cost is deductible and considered part of your operating expenses. Often, DIY landlords hire lawyers to handle tenant evictions, or they'll decide not to landlord themselves anymore and hire a property management company instead.

#10: Advertising

Any money you spend on advertising your property for rent is deductible, whether it's online, print, or radio.

Additional Tax-Related Tips

• There is a limit to how much you can deduct: most landlords can deduct up to $25,000 against their rental property income.
• Security deposits from your tenants are not taxable (as rental income) when you receive them if you intend to return them to your tenants at the end of the lease.
• If you require first and last month's rent when a tenant moves in, the total amount you receive (two months rent) is taxable the year you receive it, even thought that last month's rent may not be used by the tenant until later years.
• Generally deductions must be made in the same year that the expense was paid. In much the same way, income must be logged in the year the payment was received.
• If you use any part of your rental property for personal use, check out this publication from the IRS, and consult your accountant or tax adviser.
• Keep receipts and records of payments, in case the IRS has some questions. Some landlords keep an envelope for each year's receipts. Others file receipts based on type of expense. Choose a system that will work for you.

As always, the information provided here is for informational purposes only and under no circumstances whatsoever should it be considered legal advice. If you have any particular questions or issues, please consult an attorney.