There are many expenses landlords face when renting out a property. With the complex tax codes that exist, it is often difficult to know what may or may not be tax-deductible. Below are some items a landlord can typically deduct on their taxes.

1. Depreciation

This is an expense that landlords may be able to deduct from their taxes. It is an expense that is typically calculated when a landlord purchases an asset. For example, if a landlord purchases a building, they can calculate the depreciable value. This is basically the amount the landlord can claim as a deduction on their taxes.

2. Passive Activity Losses

If a landlord actively manages the rental property, they may be able to claim losses from a rental if the rental losses exceed rental gains. However, if they do not manage the property, they cannot deduct the losses.

3. Repairs

If the landlord makes a substantial change to the property, they may be able to deduct these improvements. For example, if the hardwood floors in the living room are damaged and need to be replaced, it is a capital expense. However, if the landlord simply replaces a toilet, this is considered a regular repair and is not a deduction.

4. Travel Expenses

If a landlord is required to travel for business, they may be able to deduct travel expenses. However, the expenses must usually fit within the business portion of the trip and not personal. In addition, if they do not meet a minimum amount of work for the trip, some expenses may not be deductible.

5. Business-Related Interest

If a landlord takes out a loan to acquire rental property or maintain it, they may deduct interest expenses. However, the interest expense must be directly related to the rental business. In addition, a landlord can only deduct mortgage interest and not home equity interest.

6. Home Office

If the property is a primary residence, the landlord may be able to deduct a portion of the home office expenses. For example, if the landlord uses a room in the home to work, they may be able to deduct a portion of the mortgage interest and insurance on that room. For non-primary residences, the landlord cannot deduct mortgage interest.

7. Legal & Professional Fees

If a landlord hires a professional to assist with their real estate business, they may be able to deduct these expenses. For example, if the landlord hires an attorney to advise them on a real estate issue, the attorney fee may be deductible. In addition, if a landlord hires a tax advisor to ensure that his or her taxes are being handled appropriately, this may be deductible.

The Bottomline

Taxes can be quite complex. When it comes to rental properties, a landlord should work with a tax professional to ensure that they are well-versed in the tax laws. This way, they can deduct as much as possible. A landlord who works with a tax advisor can also better avoid pitfalls that may arise during tax season, such as an audit. If the landlord wants to reduce their tax burden, they should be sure to work with a tax advisor on a regular basis.

Accounting companies in Denver can help you manage your rental property taxes. Tottax helps small businesses manage their accounting and taxes. Get in touch with us today!