The Landlord’s List of Rental Property Tax Deductions

When tax season comes around, every deduction helps balance your taxable income. But landlords often end up paying more than necessary when they don’t leverage available rental property tax deductions. There are several rental property tax deductions you can take. Here are some common ones to consider.

Rental Property Tax Deductions

1. Repairs

Repairs for the rental property you own and manage can put a dent in your pocket. But landlords should account for these maintenance costs, which can run up to 2 percent of their property value. You can deduct the repair costs you incurred within the tax year.

2. Home Office

If you have a home office or a part of your home that you use to conduct most of your landlord business, you can take the home office deduction. You can deduct only the percentage of your home that your home office occupies up to a specified limit. For example, if your home office took up 200 square feet of your home, you would be able to deduct $1,000 based on the simplified method that uses a prescribed rate of $5 per square foot for 2016.

3. Interest

Interest paid on business-related expenses for the rental property is also deductible. This can include mortgage interest and interest on loans for vehicles purchased solely for your rental property business.

4. Depreciation

Get back the cost of the rental property that you pay by taking the depreciation deduction. You can claim a portion of the property cost over several years. Depreciation of property can also include improvements, such as a new roof or furniture for the rental property.

Move to Claim Your Rental Property Tax Deductions

Claiming deductions doesn’t have to be difficult. Here are a few steps to follow:

  • Determine your eligibility for the tax deduction. Your costs should be necessary and ordinary. Check the requirements for the specific deduction you want to take.
  • Find the correct form. Use Form 8829 to deduct your business expenses for the use of your home.
  • Calculate your deduction. Each deduction has a different amount, and you can use different accounting approaches. For instance, you can use the simplified method for calculating your home office deduction if it’s under 300 square feet.
  • Report the deduction. Make sure you include the correct deduction calculation on the correct line item of Form 1040 when reporting the deduction.

Final Thoughts on Rental Property Tax Deductions

Save big when you take the right deductions for your rental property. Make sure that the deductions that you’re claiming are necessary and ordinary. You can also consult with a tax professional to help you determine and maximize eligible tax deductions.


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