Top Tax Deductions for Landlords 2021

February 2, 2021 admin

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Depreciation

While nobody wants to think about it, rental properties, like other goods, can depreciate in value. Landlords can experience both the depreciation of their property, as well as the items within their rental home. For example, kitchen appliances can wear out over time, requiring replacement. The extra paperwork required to file segmented depreciation claims can mean a lower tax bill. It might be worth taking a look at this type of often overlooked tax deduction.

Transportation

If you own and manage several rental properties, you will likely spend some time traveling between them for a variety of reasons. Keep tabs on your mileage between properties! Keep notes for your trips to the bank or hardware store too when you go there for your rental property needs. This will come in handy if you have a dedicated office space as outlined in the tax requirements. You might also be able to deduct your home office on your taxes. However, it will be important to use an IRS-compliant log or use software to properly track all miles driven for your rental property business purposes.

Repairs and Maintenance

Maintenance and repairs go along with owning a rental property. Things wear out or tenants may be tough on some items. Regularly scheduled maintenance can help to reduce costs down the line. Repainting, fixing the gutters, plastering, or replacing drafty or broken windows? If so, you are working your way to a lower tax bill. These items are fully deductible on your taxes for the year in which they were repaired.

Employees or Independent Contractors

There are times where you may need to hire an employee. Be it to answer phones or handle tenant concerns when you are away on vacation or personal time. Likewise, you may have a carpenter on hand, along with a plumber to tend to any tenant issues. The latter could be considered independent contractors and you will need to fill out a 1099 if you paid them over $600 for the previous year. Employees and independent contractors who make under $600 will not require a 1099.

Pique Your Tax Interest

Accounting for one of a landlord’s or rental property owner’s largest deductions, interest should not be ignored. Interest includes the amount you pay on your mortgage payment, home equity lines of credit (HELOC), and other loans that have been taken out to improve your rental property. You may also be able to deduct the interest you accrued on credit cards used for purchasing items for your rental property management.

Taxes and Insurance

As a responsible rental property owner, you likely have insurance on your investment. Any type of insurance is deemed a necessary expense, and is thereby deductible. This deduction includes not only your basic homeowners insurance, but any additional liability or special peril insurance too. All taxes, with the exception of income taxes, incurred as a result of owning a rental property, are deductible on your Schedule E tax form.

Conclusion

As you can see, there is a lot that goes into managing a rental property. You have your maintenance, tenant turnover, and the paperwork seems to be never ending at times. This is where the experienced professionals over at The Property Manager can help! With decades of tax experience that comes with managing multiple rental properties, we can definitely help to put your mind at ease.