Rental property investments are the single most tax advantaged investment out there, and many property owners are not taking advantage of the deductions available to them. As the old saying goes “The only thing certain in life is death and taxes”. However, as the owner of a rental property, this is not completely accurate. Most the time property owners don’t know the difference between living in the home or being a rental property owner.
Since our goal as the leader in property management in Pasadena is to give the property owner the best ROI, we have compiled a list of the 6 tax deductions available that are often overlooked. Taking advantage of deductions from this list may make the diffrence between you making money on your rental property and losing it.
- Mortgage Expenses
- Depreciation
- Property Management and Legal Fees
- Insurance Premiums
- Travel Expenses
- Repair Costs
Mortgage Expenses
This is a common one that most rental real estate owners are aware of: you are able to deduct the interest paid on your mortgage loan, and sometimes even the loan origination fees, and any money used to buy down points.
Depreciation
This is a deduction often overlooked by rental property owners. The cost of the rental building can be depreciated over a period of 27 1/2 years on a residential building and 39 years on a commercial building. Depreciating the building over time allows you to recoup the cost of obtaining it, and can be the difference between taxable rental income and taking a loss on the property.
Property Management & Legal Fees
If you have hired one (or many) property management companies in Pasadena to assist you in maintaining the rental property, the fees paid are deductible as a business expense. The same goes for any fees paid to a lawyer to help with evictions, lease agreements and any other rental business related activity. So at Real Property Management East San Gabriel Valley we take pride in knowing we pay for ourselves by providing a statement with all property management fees.
Insurance Premiums
This is another area that benefits rental property owners and not homeowners. If you are renting the property, you are able to deduct premiums paid for fire, theft, flood, liability, employee health insurances and workers compensation. A lot of times people don’t know the difference between a rental property and an owner occupied property.
Travel Expenses
Are you carefully training your travel expenses when going on rental business? Whether it is driving by the home or going to resolve a tenant complaint, miles spent driving on officially rental business are able to be deducted.
Repair Costs
If the repair is necessary to keep the rental home in good working order (replacing a broken window, fixing a leaky faucet) the entire cost of the repair can be used as a deduction in the year that it happened. If the repair is classified as an improvement to the home (upgrading to energy efficient windows, replacing the entire roof) it will need to be depreciated in value over time.
Refer to the IRS website (www.irs.gov) for more information on how to deduct these expenses. Please also contact a licensed accountant to discuss all possible deductions.
For more tips from Real Property Management East San Gabriel Valley read our blog.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
