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