Being a landlord means you own a rental property business. So, you get tax deductions just like a small business owner! That’s why it’s important to understand what you can write off and how to calculate all of your property management expenses so you can claim your well-deserved rental property tax deductions.
Please note: Always consult a local tax professional to discuss any changes to tax deduction rules and verify which deductions you can claim.
If you’re a first-time landlord, you may be feeling a bit overwhelmed about filing your taxes this year. Whether you fell into your landlord position or decided to invest in rental properties, it’s essential to be financially savvy and aware when it comes to paying taxes.
Fortunately, there are many potential tax write-offs for rental property owners that can maximize their ROI and save them from paying more than they should in taxes. We’re going to give some general information about a few of them in this article.
Can I Write Off Property Management Expenses?
Yes, you can write off certain property management expenses when you file your taxes as a landlord with a rental business.
For example, if you’re working with a property management company, you can write off the monthly property management fee and other expenses paid to the company.
Individual Expenses Landlords Can Write Off
These are some of the more commonly overlooked tax deductions you can make as a rental property owner. As mentioned, be sure to double-check with a tax professional for specific rules in your area.
1. Property Tax
It sounds a bit strange that you can use another type of tax as a deductible expense when filing your rental income taxes. However, it’s a great way to save!
Each month you pay property tax included in your mortgage payment. If you bought the investment property in cash, you’ll pay property taxes to the local tax office.
As a rental property owner, you can write off this tax at the end of the year, though. So, be sure to keep track of exactly how much you paid in property taxes to lower the amount you owe overall.
2. Insurance Premiums
It’s always a good idea to take out a landlord’s insurance policy to protect yourself and your residential rental property from accidents or natural disasters.
While many rental property owners are tempted to skimp on this expense, it’s wise to have it not only because it adds extra protection to your investment but also because the monthly premium is a deductible expense.
3. Repairs and Maintenance
Any repair or maintenance expenses you have to keep your property running smoothly and your tenants happy are tax write-offs. (This does not include upgrades or adding amenities.)
Make sure to keep all of your receipts and invoices from these expenses. They’ll be important when you file your taxes. If you work with a property manager like Weichert Property Management, all of the documents and expense reports you need will be available online.
4. Leasing Fees
Working with a property management company will make it much easier and more efficient to find quality tenants for your rental property. So you’ll already be saving money, but you can also potentially write off any leasing fees or tenant placement fees.
6. Professional Services
Any professional services you pay for that concern your rental business are tax-deductible. These services include financial advisors, accountants, and lawyer fees in case of evictions or other legal situations with tenants or your property.
Utility bills such as water, trash removal, electricity, or gas that you pay can be considered tax write-offs. However, keep in mind that these bills must be in your name, not your tenant’s, to use them as tax deductions.
8. Mortgage Interest
The interest you pay on the mortgage you took out to purchase your rental property is also a tax write-off. Mortgage interest is a tax deduction you definitely don’t want to miss out on. As a rental property owner, it could save you quite a bit of money in the long run.
9. Rental Property Depreciation
You can actually write off the depreciation of your rental properties each year. It’s even required by the IRS to do so!
A rental property, according to the IRS, has a life of 27.5 years. Therefore, each year you own and operate the rental property, you can write off 1/27 of its value on your taxes.
This is an extremely important deduction that you don’t want to miss. If you end up forgetting to write off your rental property depreciation, the IRS could add an extra tax when you sell your investment property.
10. Property Management Company Fees
As we mentioned previously, if you hire a property management company, you can likely write off the monthly management and other fees they charge.
Many landlords decide to work with professional property management companies because it allows them to achieve passive income and focus on other investments, projects, or simply enjoying life.
When you hire a property management company, you can still write off many of the other deductions mentioned in this list. It’s truly a win-win for landlords.
Maximize ROI and Save on Taxes with Weichert Property Management
When you work with Weichert Property Management, you can trust that your rental properties are in great hands. With our experienced team of property managers and high-quality vendors, we’ll properly maintain and manage your investment property to maximize your ROI.
When you choose Weichert Property Management, we provide you with detailed financial reporting that keeps track of your monthly expenses, invoices, rental income, and more. This makes it easy to sit down with your accountant or tax professional to determine which tax deductions you can write off.
Are you considering hiring a property management company to take care of your rental property? Learn how our owners benefit from our services to help you make your decision.