Top 10 Common Deductions for Landlords to Maximize their Profits

Deductions for Landlords

Being a landlord, you need to analyze your expenses. These are expenses that you are allowed to deduct under income tax. This will help you to reduce your taxable income and ultimately reduce your tax burdens. By deducting all the expenses, you can maximize your profits. Some of the common deductions for landlords you should know to maximize profits are:

1. Interest

Interest is the biggest deductions for landlords. Some examples of deductions are:

  • Mortgage interest
  • Payment of loans to acquire the property
  • Interest on credit cards used in the rental property for acquiring goods and services

However, in 2018, the tax cut and job act limited the interest deductions for landlords whose rental income is more than $25 million.

2. Depreciation for rental property

Another cost, like the actual cost of a house, apartment building, or other renting property, is not fully deductible in the same year. Through depreciation, the landlords get back the cost of the property.

3. Personal property

Usually, the cost of personal property used for a rental purpose can be deducted in one year. This can be done by using the ‘de minimis safe harbor deduction.’ Such personal property includes appliances or furniture used in rental property.

4. Pass through tax deductions

From 2018 onwards, landlords will be able to get an advantage under the new deduction established by the tax cut and job act. This is not a rental deduction but a kind of a special income tax deduction. The deduction will expire after a certain date in 2025.

5. Repairs

The cost of repairs in rental property is fully deductible in the same year in which they incurred. Examples of such deductions are:-

  • Repainting
  • Fixing floors of the property
  • Fixing leaks
  • Repairing windows

6. Travel

There are some travel deductions in which most property owners are not aware. The example of such deductions are:

  • Driving to tenant property to deal with the complaints
  • Visiting hardware stores for purchasing a replacement part

7. Independent contractors

If you hire someone to provide services to your rental property, their wages can be deducted as a rental business expenses. 

8. Insurance 

If you pay any insurance for your rental property, you may get the benefit of the premium deduction. The insurance might be on any casualty offered due to:

  • Fire
  • Theft
  • Flood

In case you have employees, you are also eligible for the deduction of your employee’s insurance.

9. Home office

The landlord may also deduct their home office expenses from their taxable income. However, they need to fulfil some minimum requirements. The deduction provides benefits not only to property used for office purposes but also to home workspaces, workshops, etc. This is true in the case of whether you own your apartment or you are a renter.

10. Legal & professional services

You should be aware of that:

  • You can give a vacation home on rent tax-free but only in some cases
  • Landlords can deduct up to $25,000 in rental property every year
  • The tax deduction lost by people renting property to friends or family