Rental Properties: Guide to Tax Deductible Expenses

There are deductions that a rental property owner must be aware of in order to have the best possible profit margin. A tax attorney or tax consultant would the best to contact in order to get the full picture of potential tax deductions available for rental property owners. There is a guide for rental property owners to get a view of the most readily tax deductible items.

It is important to discern the differences between improvements and repairs when figuring deductions. Not everything that is done to the rental property you own is tax deductible. Anything that is done in order to keep the rental property in good condition is a repair, which is tax deductible for the year during which the repair is completed. A task such as fixing a broken toilet is considered a repair.

When something is done to the rental property the can add value to it, that is an improvement. These improvements are not tax deductible, but you could possibly have the opportunity to include the improvements with the depreciating cost of the property’s expected existence. A garage or a new roof would be examples of improvements.

The largest tax deduction that can be taken on your rental property is that of mortgage expenses if the property is mortgaged. Expenses for the obtaining of the mortgage are not deductible at the specific time that they are paid for. Included pre-mortgage expenses would include such things as appraisals and realtor commissions. However, upon beginning to pay the mortgage a portion of the interest paid is deductible. Good record-keeping is imperative, but the mortgage company will send you a 1098 form on which the year’s interest will be detailed.

When caring for your rental property there could be some travel expenses incurred. Those travel expenses are only tax deductible if the travel if directly related to the collection of the rent payment or maintenance of the rental property. Travel expenses incurred while traveling to the rental property to make improvements are not tax deductible. Again, this type of travel can be taken as part of the depreciation of the improvements.

It is important to know that travel expenses can be deducted as the actual expenses or by the current deductible mileage rate.

Expenses such as insurance, lawn care, taxes, fees for tax preparations and casualty losses resulting from earthquake, flood, theft, or hurricane can be deducted on your taxes.

Special rules may apply for rental properties such as condos or a cooperative. For commonly owned property of a condo in order to cover property care you may have to pay assessments or dues. It may depend on the type of care needed, such as to recreational areas, elevators, lobbies or the building itself that decides how much the fees will entail. Repairs, taxes, interest and depreciation are typical tax deductions when renting a condo property. Improvement costs are to condo property is not tax deductible. Improvement costs are required to be depreciated throughout the expected existence of the property.

Maintenance fees could be deductible with a cooperative. Instead of the disallowed deduction of home improvement costs or depreciation costs, the improvement costs are added to the corporation stock cost basis. It is best to speak with a tax attorney or tax consultant in order to get the full details.

It is imperative to keep all receipts in order to prove each of your expenses incurred.

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