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December 18, 2023 | read

3 Things Landlords Need to Deduct on Their Taxes

Blake Lessard

The United States is home to over 48 million rental homes, apartments and condos. Business-minded individuals looking for a sound investment opportunity generally gravitate towards rental properties. Becoming a landlord can be both a very rewarding and worrisome process. Not only will you have to focus on keeping your properties maintained, you also need to think about reducing the amount of taxes you have to pay in each year.

With the help of a reputable and experienced accountant, reducing your tax burden will be much easier. Finding the right deductions is crucial when trying to keep more money in your pocket each year. Below are some tax deductions landlords need to think about taking advantage of.

1. The Cost of Rental Property Repairs

Investing in a rental property may seem like a great way to make easy money, but this is a misconception. As time goes by, you will have to repair your rental properties to keep them functional and appealing. These repairs can range from very minor cosmetic issues to drastic problems like flood-damage. As you are fixing problems with your rental properties, you need to document the money you are spending. The money invested in these repairs can be deducted on your taxes.

The IRS has a broad range of jobs that can be considered repairs. Instead of trying to figure out the complexities of the United States tax code on your own, you need to hire an accountant to assist you. These professionals will have intimate knowledge of the tax code and how to use the deductions offered for repairs to your advantage. Ignoring the need for this professional help can result in a lot of money being lost.

2. Consider Deducting Passive Activity Losses

Did you realize that owning a rental property is considered a passive activity? The IRS has very particular rules when it comes to passive activities and the losses rental property owners can deduct on their taxes. If you make under $100,000 off of your rental property in a given year, you can deduct up to $25,000 in passive rental losses.

However, you have to be actively involved in your rental activity to be able to use these deductions. This rental activity should include things like finding tenants and working out the terms of your rentals. With the help of an accountant, you can figure out whether or not passive activity losses are a viable option for your taxes.

3. Travel Expenses Can Be Deducted

If you travel a great deal to check on, maintain or repair your rental properties, these expenses can be deducted. Things like car loan interest, license/registration fees and parking fees can be deducted on your taxes. Getting these deductions approved will require you to keep lots of receipts and documentation.

Looking For an Experienced Accountant?

As you can see, figuring out which tax deductions you are eligible for can be confusing. Contact The Real Estate CPA to find out how we can help simplify the tax filing process.