Many people own multiple pieces of property and may even rent to tenants. A common question is what deductions may be available for rental property. There are several varying deductions that may be available, some have been limited with the new tax law, and some have remained the same. Let’s examine the deductions available.
Foremost, generally if you receive income from a dwelling unit, there are certain rental expenses that may be deductible on your tax return. Some of the expenses that may be included are mortgage interest, property tax, operating expenses, depreciation, and repairs. Additionally, you can deduct ordinary and necessary expenses for managing, conserving, and maintaining your rental property. Typically, ordinary and necessary is defined as “necessary expenses such as interest, taxes, advertising, insurance, and other similar expenses.”
Furthermore, you may even deduct the costs of certain materials and supplies. For instance, while repairing a rental property, you might be able to deduct the labor and all the supplies used in the repair. However, it is important to note that the cost of improvements is not deductible. The IRS defines improvements as any “betterment, restoration, or adaptation for a new a different use.”
For landlords, there are a large array of potential deductions and ways to save money come tax season. It is best to stay ahead of the curve and be prepared with good record keeping and receipts. If you have questions about rental property deductions, feel free to call us at the Center for Financial, Legal & Tax Services, Inc.