There are many exciting and interesting things to learn about being a landlord. But, one of the most often overlooked topics is rental property tax deductions!
As a new or experienced landlord, you need to take the time to become a master of your taxes to ensure everything is filed correctly to get you the correct deductions. You may be surprised to find that some of your day-to-day expenses qualify for deductions, and the more actively you track your expenses, the better tax season will be for you!
Rental property tax deductions may seem complicated at first, but this article has everything you need to know to file your taxes correctly every year! Read on to learn more!
Landlord Tax Deduction Basics
Every single year landlords pay more in taxes than they should. The reason is that they fail to take advantage of all the tax deductions that they qualify for, which means that they’re missing out big time!
Rentals are responsible for more tax benefits than almost any other type of investment, so learning these basics can be the difference between losing money and turning a profit!
- Interest: Your most considerable deductible expense
- Depreciation: The actual cost of your property won’t be immediately deductible, but it will grow as the property depreciates
- Repair: Any associated costs for keeping your property in good working order are fully deductible the year they’re incurred
- Travel: Any travel associated with your rental business should be tracked and reported to ensure you receive an accurate return
- Employees & Contractors: Anyone hired, whether permanently or temporarily, has deductible wages
- Insurance: Any paid premiums for damages to your rentals, health insurance, and workers compensation insurance should be covered here
- Professional Services: Any property management services, attorneys, accountants, advisors, and more need to be tracked
Tips for Tax Deductions & Strong Finances
Understanding the types of tax deductions that you’re eligible for is only part of the process. To receive the deductions you deserve, and maintain healthy finances, follow these two tips:
Tip One: Create a Strict Budget
Create a well-defined budget to ensure you’re prepared for whatever may come your way. Working with renters can lead to many unique situations, but a strict budget can help you prepare for the unexpected. Implementing a budget can also help you set specific goals for necessary, significant repairs that take time to pay off.
Tip Two: Get Professional Help
If you’re not financially savvy, don’t be afraid to enlist professional help! Whether you need help managing your finances or filing your taxes, there is a professional out there that can help you make the most of each penny. Just make sure you track these costs since they’re eligible for tax deductions!
The Importance of Tax Deductions for a Rental Property
Being a landlord is a lot of work, and managing your finances can be overwhelming. Much of your day to day operating costs may be eligible for deductions. It’s crucial that you closely monitor and track your income and deductions and keep accurate records for tax purposes.
Understanding the tax deductions that you’re eligible for doesn’t have to be an overwhelming experience! Start by organizing your finances, creating a budget, and keeping track of the areas you’re spending in that qualify for a deduction. But, if all else fails, enlist professional help!