Top 5 Tax Benefits for Rental Real Estate Property Owners

Residential rental real estate often provides a steady stream of income for the property owner or landlord. There are many tax deductions that also make the residential rental property investment attractive year after year. Most people are aware of the largest deductions – mortgage interest and depreciation. Below are five other deductions that add up to tax savings.

  1. Home Office
    Because owning rental property is a business, you may be entitled to a home office deduction for the space you use to conduct the business. The IRS is very strict about what qualifies as a home office. For example, the space must be dedicated to business use only. However, even if you don’t qualify for the complete home office deduction, keep records and deduct all administrative expenses such as office supplies, postage, computer equipment, etc.
  2. Travel
    Whether local or long distance, you can deduct travel to visit your rental property or to go to the store to purchase items for your property. When using an automobile for transport, you can deduct all actual expenses, or use the standard mileage deduction, which is 0.575/mile for 2015. Note that you cannot use the standard mileage expense if you claim a Section 179 deduction for the vehicle or have claimed accelerated depreciation deductions in prior years on that vehicle.
  3. Contract Labor and/or Repairs
    If you have people that work for you performing tasks such as repairs or property management, you can deduct the fees you pay as a business expense. (Make sure that you follow rules regarding contract labor and filing of Forms 1099 as applicable.) Repair costs – fixing something that is broken as opposed to improving the property – are also deductible. Repair costs include both goods and services. Expenses, such as repainting, may also count as repairs if you are fixing the property to transition to a new tenant, such as repainting.
  4. Insurance and Casualty or Theft Losses
    Almost any insurance type needed for your rental property qualifies for a tax deduction: liability, fire, flood, or theft. If you have employees, health and workers compensation insurance are also deductible. In the case of a casualty loss due to something like fire or flood, the loss is also at least partially and sometimes fully deductible. It depends on your insurance coverage and other factors such as the percentage of the property that was destroyed.
  5. Professional Services
    Any professionals that you consult regarding your rental property also provide deductible expenses. Examples include fees for accounting, financial planning, legal advice, and/or property management services.

Please talk with Jeff Bergman, CPA at Salmon Sims Thomas Accountants and Consultants to ensure that you take all of the deductions for which you qualify.