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An Owner’s Guide to Rental Property Tax Deductions

Pawtucket Rental Property Owner Doing Her TaxesAmong the most significant advantages of owning Pawtucket rental properties is that, come tax time, you can benefit from deductions that other taxpayers cannot. However, to benefit from these deductions, you must first learn what they are and how to have your numbers ready before you start filling out your return. In this guide, we’ll analyze the tax deductions that rental property owners can get and how they can help reduce your tax liability per year.

Common Expenses You Can Deduct

Having a clear awareness of your property’s common expenses is key to optimizing your cash flows. It can also help you at tax time because you can deduct most of them on your return. Budget expenses that are also tax-deductible are:

  • Repairs and maintenance. Generally, any amount you spend to maintain the condition of your property is a deductible expense. This covers fees paid to service providers, contractors, and all that. Don’t forget that improvements – mainly substantial ones – are not deductible as expenses. Instead, they should be amortized as capital improvements.
  • Insurance. Insurance premiums for your landlord insurance policy, including any fire, flood, or personal liability insurance, are deductible expenses.
  • Utilities. You can deduct utility payments on your tax return if you pay for any utility service, such as water, garbage, electric, or gas. Utilities paid by your tenants are not deductible.
  • Advertising. Any money you spend to market your property and/or find a new tenant is a deductible amount. This includes the cost of a web domain or website hosting, online ads, and professional fees for photography or video tours.

Additional Tax Deductions

Along with common expenses, there are a couple of other deductions that rental property owners can make to help reduce their tax liability. The following are examples of tax deductions:

  • Mortgage interest. Any mortgage interest you pay on related loans is tax-deductible for investment properties. This is usually one of the most advantageous deductions for rental property owners.
  • Depreciation. Another significant deduction that rental property owners can use is depreciation. All properties tend to depreciate over time due to wear and tear. The benefit is that you can deduct a certain amount for this depreciation over the life of the property. You can also take depreciation on capital improvements, such as appliances, fences, and renovations.
  • Legal and professional fees. Just like you can deduct expenses paid for repair work or landscaping, you can also deduct money paid to attorneys or other professionals who perform services related to the management of your rental property. Most costs associated with eviction, Pawtucket property management, and tax preparation are also deductible.
  • Travel. Owning rental properties often needs a bit of back-and-forth travel, whether you stay in another state or only a few miles away. Those business-related miles can accumulate over a year and are deductible on your tax return. Just keep a log of your travel miles and any other travel-related expenses.

To take full advantage of all the deductions available to you, you have to keep your property-related expenses organized and in one place. Furthermore, you don’t have to wait until the end of each year; you can start keeping track of your expenses immediately and add as you go along. Doing this in this manner might make your life easier annually when tax season comes around.

 

One more technique to make tax time easier is to appoint Real Property Management Providence to pay attention to your operational expenses. Apart from professional property management, we keep an eye on your property’s income and expenses and provide reports that can make tax time much easier. Contact us online to learn more!

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