5 Ways You Can Deduct Your Rental Property Income Taxes

Did you invest in real estate that you rent out? If so, apart from the income you can get from it, there are also deductions you can opt for to reduce the tax on your profits that can result in more overall income for you. So, if you have yet to make the most out of your deductions, then you're in the right place.

Let's talk about rental property income taxes and the deductions you can get:

1. Deducting Travel Expenses

Similar to employees in the capacity of their work, landlords are entitled to deduct their travel expenses incurred while on the job. You can do this by creating a record of your travel expenses and then keeping the receipts or invoices that support those expenses.

If you are a landlord who often travels to check on your properties, then you can use the "standard mileage rate" or have a record of actual expenses.

2. Deducting Property Management Fees

If you have a property management company taking charge of your real estate business, you can ask them to issue you a 1099-MISC form. This form is issued to the one who pays for the services of someone in a business. It will contain the management fees you paid, the total paid out, and the amount exempted from tax.

If you are renting out a property you already own, you may deduct the management fees you pay yourself. If you rent out a property you do not own, you can deduct the management fees you pay to a property manager.

If you are claiming a property management fee as a rental property expense, you must pay the property manager separately, as this is different from employee tax.

3. Deducting Property Improvements

If you make improvements to your property that benefit your rental income, then you can deduct them as rental expenses.

As the landlord, you can opt to make the improvements yourself, or you can hire a contractor to do it. In either case, you will be able to deduct these costs.

If you opt to make the improvements yourself, you can also deduct the costs of labor and materials in your rental income as rental expenses on your tax return.

If you hire a contractor or other service provider to make the improvements, you will have to pay them a fee. This fee can then be deducted from your rental income.

4. Deducting Mortgage Interest

If you are the owner of a property that you rent out, you can deduct the interest you pay on your mortgage. The mortgage interest that you deduct can only be for your rental property.

If you are a professional landlord, you can also deduct the interest you pay on your loan for your real estate business. If you are claiming a mortgage interest deduction, then you can deduct mortgage interest on the mortgage of any property that is rented out.

5. Deducting Property Taxes

You can also deduct the property taxes that you have paid in a given tax year. As a landlord, you can deduct property taxes paid on all the residential or commercial real estate that you own.

Conclusion

As a landlord, you can enjoy the perks of claiming these tax deductions. If you have been able to deduct these items in the past and are looking to deduct them again this year, then it would pay to take a look at your records to determine if your rental income was higher than before.

With that in mind, if you have yet to enjoy these deductions, then you can maximize them by paying particular attention to the deductions you can claim while on the job and maximizing your return.

Tottax is a tax and accounting agency that helps small businesses solve problems related to accounting. If you are looking for rental property tax services in the US, get in touch with us today!