A Deductions Checklist...
Author: Keith Huggett
Many people, including real estate professionals, don’t fully appreciate just how much money they can save with tax deductions. Almost everything you buy for your real estate business is tax deductible as long as it is ordinary and necessary and the cost is reasonable. These deductions can really add up as savings for your business. There are dozens of possible tax deductions for real estate professionals.
- Advertising – The costs of signs and advertisements for the rental property.
- Auto – Landlords are entitled to a tax deduction whenever they drive anywhere for their rental activity. Keep a mileage log to track your starting location, destination, purpose, and mileage. Using a mileage app on your smart phone can simplify this task.
- Depreciation – Landlords get back the cost of real estate through depreciation. This involves deducting a portion of the cost of the property over many years.
- Equipment / Computers / Furniture – These items are only deductible to the extent used for business. These are capitalized and deducted through depreciation over time.
- Home Office – Working from a home office allows you to deduct a portion of your home mortgage interest, homeowner’s insurance, utilities and property taxes toward your rental business. This is true whether you own your home or apartment or are a renter.
- Home Owner’s Association Dues – HOA's often charge association dues. These dues are used to provide maintenance services for the home owners. Renting out your property makes these fees deductible for rental activities.
- Interest – You can claim the mortgage interest paid on loans used to acquire or improve rental property and interest paid on credit cards used to purchase goods or services used in a rental activity.
- Insurance – You can deduct the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance.
- Lawn Service / Pest Control / Carpet Cleaning – The cost of services not paid for by a tenant are deductible.
- Professional Fees – Any costs you pay to an attorney for eviction, a management company, engineer or CPA, etc. are deductible as they relate to the rental business.
- Repairs – Repairs may be expensed (deductible this year) OR capitalized and depreciated (deducted over many years) depending on the size and nature of the expenditures. There is a difference between making repairs and making improvements on your home.
- Telephone – Only the business portion of your phone usage is deductible.
- Utilities – If utilities not paid by the tenant, these costs can also be deducted.
