Tax Deductions for Landlords (Part 1)

Posted by on March 20, 2015
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Tax Deductions for Landlords (Part 1)

There are quite a few, often-overlooked expenses that landlords can report as a tax deduction.

If you own rental real estate, you must report the income you earned from this property on your federal tax return. You will also be required to pay tax on your rental income if you made a profit.

First, keep in mind that aside from the monthly payments you receive from your tenants, taxable rental income also includes:

  • advance rent payments
  • security deposits used as a final payment of rent
  • payments for canceling of a lease
  • property or services received in place of money, as rent

So, what’s considered a “rental expense”?

On the plus side, rental properties offer more tax benefits than most investments. In fact, you can deduct a majority of the rental expenses you had during the year. According to the IRS, you can report expenses related to the following:

  1. upkeep & maintenance of the property
  2. conservation & management of the property

Landlord tax deductions also include contract work!

Remember when you forked over thousands to a plumber after your tenant called complaining that the toilet wasn’t flushing?  How about that week the roof collapsed from snowfall and you were forced to track down a roofer?

These (often unexpected) headaches come along with life as a landlord. Fortunately, they are related to the upkeep and maintenance of the property and thus, tax deductible expenses.

In fact, you can include any amounts paid to those you hired to upkeep and fix your property, including:

  • contractors
  • temporary workers
  • long and short-term employees (such as residential managers, grounds maintenance workers)

Whether you paid an electrician, gardener, landscaper, plumber, roofer or painter, be sure to report any services you paid for during the year on your tax return.

Now, this is essential: you must save all receipts and documents as proof that you did in fact pay these individuals for the services.

The deductions you can claim don’t stop there!

Check out part two of this article to learn other expenses that will further reduce your tax bill.    |   Photo via Steven Damron on Flickr

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This entry was posted on at 4:44 pm and is filed under Tax Deductions and Credits | Blog.

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