Five tax deductions for landlords

For many rental property owners, tax deductions can mean the difference between making and losing money. Fortunately, landlords can take advantage of federal tax deductions in the form of the following:

1. Loan interest

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 Loan interest is generally the single largest expense that rental property owners have to pay. Landlords can deduct interest on mortgages for the rental property, interest on credit cards, and interest on personal loans used to maintain or improve the rental property.

2. Repairs

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 Landlords spend a lot of money each year in repairs: the costs of re-painting walls, replacing broken tiles, or fixing leaky water heaters, and other similar activities qualify for this type of tax deduction. As long as the repairs don’t extend the life of the property or add material value to the property, the rental property owner can write them off.

3. Local and long distance travel expenses

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 Landlords can deduct travel expenses as long as the trips were made in connection to the property, for example, showing prospective tenants around the property. For local travel, landlords can apply for a tax deduction every time they drive to the property. Landlords can deduct the cost of fuel, car repairs, and maintenance. Long-distance travel expenses typically include transportation costs, lodging, and meals.

4. Legal and professional fees

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 If a landlord hires a lawyer, accountant, real estate agent, or some other professional for assistance in running his business, the fees that the landlord pays are deductible.

5. Casualty losses

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The loss or damage of a property due to an unexpected, sudden, and unusual event like earthquakes, hurricanes, and floods is tax-deductible. The amount that could be written off depends on the amount of damage undergone by the property and the coverage of the landlord's insurance.

Before attempting to claim any tax deductions, in case of an audit, landlords must keep permanent records of tenant leases, legal documents, permits, and property titles, and short-term records, like lists of repairs, advertising costs, and wages paid.  

Isidor Hefter is a certified public accountant specializing in tax planning and research for corporations and individuals with high net worth. For more tax-related articles, subscribe to this blog.