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10 Key Tax Deductions for Rental Property Landlords

David Granahan
See where you can save costs by exploiting tax deductions.
Did you know that you can save on taxes by deducting rental property expenses like real estate tax, maintenance, insurance, and professional services?

As a landlord, you may always seek ways to save money and maximize your income.

One of the greatest and oft-overlooked cost-cutting strategies is purchasing a home warranty for your rental property. A home warranty can qualify as a deductible expense, allowing you to maximize your tax concessions further.

On average, landlords can claim back thousands of dollars in tax deductions on their properties and minimize their rental property expenses.

What Are Rental Property Tax Deductions?

Rental property tax deductions allow landlords to deduct certain expenses from their taxable income. These deductions can include costs related to maintaining and improving the property, such as repairs and upgrades.

To ensure you can claim these deductions on your tax return, keeping accurate records is essential. Always save receipts and invoices associated with your rental property. For easier tracking and management, consider using a separate bank account or credit card exclusively for rental property expenses.

Here are ten rental property tax deductions you should take advantage of as a landlord.

» Discover how you can benefit from a home warranty for your rental property.

1. Home Warranties

Landlords can safeguard their rental properties with home warranties. Choice Home Warranty and Select Home Warranty provide extensive coverage for your home's vital systems and appliances, with accessible customer service and a network of qualified technicians for speedy and dependable repairs.

Landlords can claim a tax deduction for the cost of their home warranty as a business expense. If you decide to use this tax benefit as a landlord, make sure to save all your receipts and invoices.

2. Real Estate

Property taxes are a significant expense for owners. Fortunately, you can apply for real estate tax deductions on your tax return.

Save your property tax statements, receipts, and any relevant communication to claim this deduction.

3. Legal Fees

As a landlord, you can also deduct expenses for managing your rental properties, such as legal and professional fees. For example, if you hire an attorney to draft a lease agreement for your tenants, you can deduct the cost of that service from your tax return.

4. Rental Property Expenses

Any rental property expenses related to maintaining and operating your rental property, including cleaning, lawn maintenance, and pest control, are tax-deductible. Landlords should keep detailed records of these expenses, ensuring they can claim these deductions during tax season.

5. Depreciation

Depreciation is a tax deduction that allows you to recover the cost of your rental property if it declines over time. This deduction applies to the price of the property itself and any improvements you make to it.

To claim depreciation deductions, you'll need to use IRS Form 4562.

6. Capital Improvements

Any improvement you make to your rental property that increases its value or extends its life can be counted as capital improvement deductions. Examples of capital improvements include installing a new roof, replacing an HVAC system, or adding a new room.

Retaining all related invoices and documents is essential, ensuring these improvements are accounted for correctly during tax filings.

» Get the best home warranty plans for HVAC and stay comfortable all year.

7. Repairs and Maintenance

Repairs and maintenance are deductible expenses for landlords. These include fixing a leaky faucet, replacing a broken window, or repairing a damaged wall.

To ensure a smooth tax filing process, landlords should diligently document these expenses, keeping records of payments and the nature of the repairs.

8. Property Insurance

Insurance is a must for rental properties. The premiums paid for such insurance are deductible. This rule applies to rental property owners and property managers operating as LLCs. To claim this deduction, you should meticulously record these premium payments and consult your tax advisor for best practices.

9. Advertising and Marketing Expenses

Promoting a rental property often involves advertising expenses. Advertising expenses are deductible for landlords. This includes online ads or hiring a professional photographer to create a virtual tour of your rental property.

10. Professional Services

Landlords often engage professional services, from accountants to property managers, to streamline their operations. These service costs are deductible. To maximize rental earnings and ensure accurate tax filings, you should ensure all these expenses are well-documented and consult with professionals as needed.

Record All Costs

Taking advantage of rental property tax deductions is a helpful way to save money and maximize your rental income. The most important thing to do, which relates to almost every possible property tax deduction, is to keep detailed records. Every purchase or invoice should be on the books. If you're unsure about something, it's essential to seek advice from a tax professional to ensure you're minimizing your expenses and acting legally.

Claiming these landlord tax deductions can reduce your tax liability and increase your rental property's profitability.

» Maximize your home warranty coverage with our top tips for successful claims.

David Granahan
David Granahan writes for Top10.com and is a qualified financial advisor with six years experience in financial services across the insurance and investment sectors. He is also a financial writer who has worked with some of the world's largest brands and fintech startups.