All about Landlord Tax Breaks

Being a landlord is definitely not a job for just anyone. You must be communicative, a good salesperson, available for emergencies, and, if you choose the wrong tenants, you may have to be very patient. In the end, you may also need a good lawyer. However, this article is about the upside of being a landlord, which is that as a landlord, you may be entitled to a variety of tax breaks beneficial to your bottom line.

Taxes and Interest

As an owner of real estate, you will certainly be required to pay interest on your mortgage, as well as annual real estate taxes on your property. Both of these payments, mortgage interest and property taxes, are income tax deductions. It is also possible to deduct the interest paid on credit cards that you use to make improvements to your rental property.

Depreciation

Although real estate tends to appreciate in value over the years you're paying it off, you are allowed to depreciate the cost of purchasing the property and to take that depreciation, spread out over a number of years, as a tax deduction. The actual amount of depreciation and how many years it must be spread out will vary depending on the value and type of property that you own.

Expenses

Any necessary repairs that a landlord makes to rental property are considered to be business expenses and can thus be deducted from taxable income. Other deductible business expenses might include association fees, utilities and insurance.

Home Office Deductions

If you use a home office to perform your landlord duties or any other home-based business, you are entitled to deduct the expenses for that home office or workshop space on your taxes. You can deduct things like utilities, internet and tool and equipment purchases like computers.

Travel Expenses

Any travel that you do that pertains to your job as a landlord can be deducted from your income. When you file your taxes, you can take this deduction using the number of miles driven or by using gas and maintenance expenses. Either way, keep excellent records so can take full advantage of this tax break.

Professional Services

Any time you pay someone else for handling some aspect of your business as a landlord, that expense qualifies as a tax deduction. Professional services may include attorneys fees, consulting fees and accounting fees, to name just a few.

Being a landlord is a business. As a landlord, you are entitled to all of the tax breaks that go along with conducting your business. Several tax breaks are related to the cost of purchasing and owning real estate such as mortgage interest, property taxes and the depreciation of your building. Most of the other tax breaks are centered on the expenses involved in running your landlord business such as home office expenses, maintenance expenses, travel expenses and expenses relating to professional services. It's important to keep excellent records so that your accountant or tax preparer can find every possible deduction for you.