Every year, millions of landlords pay taxes on rental income. Most of them are unaware of the advantages of all the tax deductions that can be availed by them easily. But those who are experienced build wealth and use every tax benefit that government allows them. Therefore, question is about awareness of advantages of tax deductions rather than being a landlord.
Hence, if you are a landlord, don’t overlook these deductions that might decrease your tax liability, the liability that comes only with revenue. Before claiming any of the deductions, have receipts and files to back them up in your best interests.
- Some common tax deductions for landlords can be related to legal and professional services. If you are an LLC, S Corp, Trust, or Partnership, you may qualify as a pass-through business. This pass-through tax deduction is effective since 2018. It is a special income tax deduction (no rental deduction) where there is up to 20% deduction of the landlord’s qualified net rental income or 2.5 % of the initial cost of their rental property in addition to 25% of the amount they pay to their employees. However, there are income limits if you are single or married.
- Business-related insurance is tax-deductible. Therefore, whenever you are trying to decide if insurance is relevant to business, do ask yourself whether you would buy this insurance if you really didn’t own a rental? Well, liability insurance, fire, flood, theft insurance, mortgage insurance premiums, personal umbrella insurance, health for employees, and worker compensation insurance cover all the personal assets and legal liability above and beyond the coverage on rental properties.
- Whether your tenant is an independent contractor or an employee, you can claim their wages as a tax deduction. People to whom you pay wages, like a property manager on Cape Cod, Handyman, or Contractor, keep track of these expenses as long they are related to your rental business expenses.
- According to the Tax Cuts and Jobs Act, there is a limited landlord tax deduction on interest. Having said that, those who earn more than $25 million from their rentals can avoid this limit with an agreement to belittle their own rental property over 30 years as opposed to 27.5 years. Interest on business loans and mortgages is evermore landlord’s single biggest deductible expense. These are some of the common examples of interest that landlords can deduct easily. These interest payments on loans help to ameliorate a rental property and interest on credit cards for any of the rental activity services.
- The fully deductible cost of repairs to rental property may incur in the same year the property was rented. Some of the good examples of these deductible repairs include your time and travel for making repairs be it repainting the property, fixing gutter/floors, leaks or replacing the broken doors and windows, showing apartments, meeting contractors, fixture repairs, plumbing repairs, mileage, and vehicle expenses. Moreover, there is HELOC interest for loans specially used to repair or improve the property.
- Repairs are often confused with maintenance. However, both these terms are different. In maintenance of the rental property, you are not necessarily fixing anything. In repairs, you are liable to check the broken or non-functional areas of the house. These elements are necessary and reasonable to maintain the property in terms of tax deductions for rental property owners. Maintenance of the rental property (building and grounds) includes landscaping, tree trimming, pool cleaning, homeowner association fees, HVAC filters, and, last but not least, pest control and treatment.
- According to the professional Cape Cod vacation rental property management by RPM Associates, legal, accounting expenses, and professional services are deductible in general. Any tax deduction calculations by the accountants, attorneys, and property managers in the professional services must be for the benefit of the rental property owner. However, talking to an accountant who specializes in property management may be beneficial to you, too.
- Most of the landlords live at a great distance from their rental properties. If they travel a long distance to see your assets and perform rental business tax deduction on expense of business, then you may calculate the travel expenses and document the tax deductions as well. This includes Airline fares, hotel charges, 50 % of the meal expenses, and car rentals.
If you are curious about tax preparation and filing, then always seek help from the property management company We are a great resource for dealing with such tax deductions. You can get any kind of help from us.
For property Management on the South Shore and Cape Cod, contact us online.