Skip to Content

Get a FREE assessment of your rental property. Start here!

Get a FREE assessment of your rental property. Start here!

An Owner’s Guide to Rental Property Tax Deductions

Brooklyn Rental Property Owner Doing Her TaxesOne of the main advantages of owning Brooklyn rental properties is that, come tax time, you can reap the benefits of deductions that other taxpayers cannot. However, to benefit from these deductions, you have to understand what they are and how to have your numbers ready before you begin filling out your return. In this guide, we’ll discuss the tax deductions that rental property owners may claim and how they can help reduce your tax liability every year.

Common Expenses You Can Deduct

Having a thorough knowledge of your property’s common expenses is crucial to optimizing your cash flows. It can also benefit you at tax time because you can deduct most of them on your return. Budget expenses that are also tax-deductible include:

  • Repairs and maintenance. Everything you pay to maintain the condition of your property is usually a deductible expense. This comprises fees paid to service providers, contractors, and so forth. Don’t forget that improvements – particularly big ones – are not deductible as expenses. Rather, they need to be amortized as capital improvements alternatively.
  • 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 spend on 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 covers whether you pay for a web domain or website hosting, online ads, and professional fees for photography or video tours.

Additional Tax Deductions

Aside from common expenses, there are a couple of other deductions that rental property owners may claim to help reduce their tax liability. These tax deductions involve:

  • Mortgage interest. Any mortgage interest you pay on related loans is tax-deductible for investment properties. This is generally one of the most favorable deductions for rental property owners.
  • Depreciation. Another wonderful deduction that rental property owners can take is depreciation. All properties seem to depreciate over time due to wear and tear. The advantage 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 as you may deduct expenses paid for repair work or landscaping, you can also deduct cash given to attorneys or other professionals who conduct services related to the management of your rental property. Most costs associated with eviction, Brooklyn property management, and tax preparation are also deductible.
  • Travel. Owning rental properties frequently includes a lot of back-and-forth travel, whether you reside in another state or only a few miles away. Those business-related miles can add up over a year and are deductible on your tax return. Just keep a log of your travel miles and any other travel-related expenses.

It’s necessary to keep your property-related expenses organized and in one place if you want to take full advantage of all the deductions offered to you. And you don’t need to wait until the end of each year; you can start keeping track of your expenses immediately and increase them as you go along. Doing it this way can simplify your job yearly when tax season comes around.

 

One more method to make tax time simpler is to engage with Real Property Management New York Gold to supervise your operational expenses. Besides professional property management, we pay attention to your property’s income and expenses and provide reports that can make tax time much simpler. Contact us online to learn more!

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.