Being a landlord is expensive.
Whether you’re completing maintenance on a property, collecting rent, or advertising a vacancy; there is no shortage of tasks to complete as a landlord. But, if tax preparation is not on your ‘to-do’ list, it can cost you. That’s because there are a number of tax deductions that landlords like yourself could be eligible to claim. That’s why we’ve listed the top five deductions to consider filing as a landlord.
1. Mortgage Interest
Landlords are able to deduct mortgage interest as a business expense for any investment properties they own. So, if you are carrying a mortgage on an investment property, you will likely qualify. To claim this amount simply keep an eye on your mail as your mortgage company will send you IRS Form 1098 at the end of the year. This form will indicate how much you’ve paid in interest (even if part of the payment was money that was being put into escrow).Once you know the amount, you can then claim it on Schedule E of the 1040 or 1040-SR tax form.
2. Rental Property Depreciation
Another deduction that landlords should know about is rental depreciation. This deduction allows landlords to deduct the costs over the property’s useful life on their taxes. To do this, there are specific criteria that must be met. For example, those that claim this must be owners of the property, use it for business or income-producing activity, have it last for more than one year, and ensure the property has a determined useful life. However, if this deduction is claimed, and the property is sold for more than the depreciated value, you might be at risk for owing money back to the IRS through depreciation recapture taxes on the gains.
3. Repairs and Improvements
There are certain types of repairs that landlords are able to claim on their taxes. The IRS defines a repair as something that needs to be done to keep the retail property in good condition (for example, painting, fixing a broken light, etc.). Further, this deduction will only be eligible in the year that it was paid for.
Any work that is completed on a property in order to raise the property’s value or to ‘improve’ it will not be eligible to be claimed. This means, landlords might want to tackle problems as soon as they arise in order to claim it as a repair instead of allowing issues to multiply until an entire ‘renovation’ needs to be done in order to salvage the property.
4. Property Taxes
It should come as no surprise that property taxes can be claimed for a deductible on your taxes. Homeowners are able to deduct up to $5000 (or $10,000 if they are married and filing jointly) for property taxes and either state or local income/sales taxes.
5. Travel Expenses
As a landlord, you likely travel quite a bit to maintain your business but did you know that the money you spend on these business-related trips might be eligible to be claimed? That’s because the IRS allows you to claim things like gas, car maintenance and mileage that was spent on trips related to maintaining or improving the property.
Ultimately, landlords have a tonne of deduction options. However,it is important to talk them over with trained professionals like us at A.P. Accounting & Tax Services.
Our team of experts can make sure filing is stress-free, and that you are fully informed before submitting your papers. If you’d be interested in learning more, give us a call at 407-328-5001.
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