Know Your Taxable Deductions As a Landlord

Tax time is just around the corner and we here at Drake Properties thought you might find this information helpful.

According to the IRS, you are allowed to deduct certain expenses relating to your rental property pertaining to maintenance and management. Depreciation related to the rental property is also allowed to be deducted. These two deductibles will help to support your income on the rental property. These deductibles can even be applied when the property is vacant given that you intend to rent the property again. However, it is important to note that these expenses can only be deducted during the year in which they are paid, not during the year in which they are serviced.

A list of deductible expenses includes:

-Management fees

-Advertising

-Maintenance and Repairs

-Gardener

-Cleaning and supplies

-Utilities

-Insurance

-Taxes

-Mortgage interest

-Travel to and from the property

-Tax Preparation fee

In addition, improvements to the property are viewed as assets and are not included in your expenses. Instead, they are input into the Assets/Depreciation section of your tax return. With major improvements to your property that add value, you can’t deduct them all in one year; they must depreciate over time; please consult your tax profession regarding this.

Because security deposits are intended to be returned to the tenant, they are not taxable. In the case of damage to the property where the landlord must keep the security deposit, then the money is taxable and is required to be included on the income shown on your tax return for the year in which the tenant vacates the property.