Tax information for property owners

Here are some of the most common ways to make tax deductions on residential rental property:

1. Interest – you can deduct mortgage interest payments on loans to buy the property or loans for improvements. Less well known is that you can deduct interest on credit cards for goods or services used for renting out a property.
2. Depreciation – The initial cost of buying a house or apartment to rent out is not fully deductible in the year in which you buy it, instead you can deduct a portion of the cost of the property over several years.
3. Repairs – Providing the repairs are deemed ordinary, necessary and reasonable in amount are fully deductible in the year in which they were incurred. Typical examples are repainting, plastering and fixing leaks.
4. Local Travel – If you are using your car or truck to drive to and from your rental building to maintain the property and deal with tenants then you can deduct your cost of travel, however if the travel is to improve your property these expenses must be depreciated over many years.  You can deduct your travel expenses either by simply deducting your actual expenses (e.g. gasoline, repairs) or you can use the standard mileage rate. To qualify to use the standard mileage rate there are several criteria to be fulfilled and you should check with your accountant or the government website for clarification.
5. Long Distance Travel – If you have to travel overnight you can deduct your expenses, such as your air fare and hotel bills. This is a less common deduction so be prepared for the IRS to scrutinize any claims.
6. Home Office – Landlords can deduct their home office expenses from their taxable income.
7. Employees and Independent Contractors – Whenever you pay someone to perform services for your residential rental property you can deduct their wages as a rental business expense.
8. Casualty and Theft Losses – If your rental property is damaged from an unforeseen event, like a fire or flood you may be able to obtain a tax deduction for all or part of your loss.
9. Insurance – Virtually any premium for insurance associated with the rental property can be marked as a deduction. If you have employees you can even deduct their health and workers’ compensation insurance.
10. Legal and professional services –  As long as the fees are for work directly related to the rental activity they can be marked as deductions. Typically, fees are incurred from property management companies, accountants and attorneys.