Rental Property Tax Deduction

Rental property tax deduction can make a substantial difference

If you are a landlord then you must make sure that you avail full benefits that rental property tax deduction provides. You will be surprised as to the number of heads under which you can avail these benefits. These include rent, payment to cancel a lease, expenses paid by the renter and so on.

Some common deductible expenses include:

1. Interest: Deductible interest include mortgage interest payments on loans used to acquire or improve rental property and interest on credit card payments made to purchase goods or services for rental purposes. In fact, interest is the biggest deductible expense for the owners of rented property.
2. Depreciation: The cost of rental property can be recovered through depreciation. This benefit becomes available from year two. A landlord can continue to claim depreciation over a period of 27.5 years.
3. Repairs: Repairs such as repainting, tiling the floor, fixing leaks, plastering and replacing broken windows in a rented property are fully deductible in the same year in which the expenses are incurred. These repairs should be ordinary, necessary, and reasonable in amount and not capital improvements.
4. Travel: The landlords can avail a tax deduction on expenses they incur when they travel to their rented property to talk to tenants or carry out repairs. These expenses also include the expenses that the landlord may incur while visiting plumbing or electrical fault fixing companies. If the landlord happens to be staying in another city then he can even use his airfare and hotel bills to claim tax deduction. Smart landlords use this clause to mix business with pleasure
5. Home Office: If landlords use a part of their houses solely for activities for their rental business, then they may deduct their home office expenses from their taxable income.
6. Losses: Losses that result from fires or floods also qualify for tax deduction. This deduction may be on a part of the loss or full loss. However, the actual deduction also depends on the amount of insurance that a landlord may claim.
7. Insurance: Landlords can deduct the premiums they pay for any insurance for their rented property. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance.
8. Services: Fees paid to attorneys, accountants, property management companies, real estate investment advisors, and other professionals are deductible provided their services are used for work related to rental activity.

There also are certain expenses that cannot be deducted. These include: loss of rental income due to vacancy, expenses incurred on modifications such as a room addition, new appliances, fencing, a new roof and so on.

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