Real Estate Blog

What Tax Deductions Can I Take When I Rent Out My Home?


System - Sunday, March 16, 2014

One of the many benefits of owning a rental home is the tax deductions you can take for the property. If you are moving and decide to rent out your current home instead of selling it, you can write off quite a few expenses. In fact, the list of deductible expenses is longer than you might think, so it would be valuable to keep track of all receipts for purchases made in regards to the property.

Costs to Put the Property in Service

If your home is empty and you are waiting for renters, you can deduct quite a few expenses. Any advertising costs you spend, even if those costs are paid to a property management firm, are deductible. You can also deduct the cleaning and maintenance costs during this time, which is great news if you would like to hire these services out instead of handling them on your own.

If you are cleaning up from one tenant to the next, you may have a few additional costs. Trash removal, painting and carpet cleaning may all fall into the category of prepping the home for the next tenant. Yard maintenance during the time it is vacant can also be deducted.

Costs to Manage the Property

Owning property brings many costs. You have to pay taxes and insurance on the home, and if you have a mortgage, you will also be paying interest on the house. If the home is in a neighborhood with a homeowners association, or if it is a condo with condo fees, you also must pay those. Also, if you pay a property management firm, the cost is deductible as a management cost.  

Costs to Maintain the Property

The costs of property maintenance can be quite extensive, and this is a place where you can accumulate deductions quickly. Consider costs such as:

  • Rental of equipment
  • Repairs
  • Materials for repairs
  • Pest control
  • Utilities you choose to pay or pay while it is vacant

Keep track of anything you spend on your property, as it is likely deductible.

Considerations with Improvements

Improvements to the home are deductible, but they usually have to be capitalized and depreciated over several years instead of deducted the same year you paid them, as you can do with repairs.

So what is an improvement compared to a repair? Improvements add to the home's value or prolong its life. For instance, if you install a water filtration system or spend money modernizing the kitchen or adding insulation, these would be improvements.

Repairs, such as painting, replacing broken windows or doors, fixing leaks or repairing a broken appliance, are all deductible in the year you perform them.

Travel Expenses

One tax deduction many landlords forget about is travel to and from their rental property. Even if you live in the same community, you can write off your mileage when you travel to your rental property to collect rent, perform inspections, do repairs and any other activity that requires your attention. Keep detailed records of your mileage and the activities performed while you are there to prove your activities, and you can write off these expenses.

As you can see, the deductions for your rental property are quite varied. By keeping careful records and paying attention to your activities relating to your rental property, you can turn it into a valuable tax deduction.

For specific guidance on tax deductions relating to rental property, consult the Internal Revenue Service website by clicking here.

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Yaffe Real Estate does not advise on any personal income tax requirements or issues. Use of any information from this site or any other website referred to is for general information only and does not represent personal tax advice either express or implied. You are encouraged to seek professional tax advice for personal income tax questions and assistance. 


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