IRS enables you to take deductions for any legitimate expenses that are related to running rental properties. If you own some rentals, you may claim expenses in categories spanning everything from depreciation, repairs, insurance to interest. But, you should record them. To make sure that you are taking advantage of rental estate tax deductions, it is important to use accounting software.
Mortgage Interest Payments
Interests on rental properties may take some forms and can be one of the rental property’s biggest tax benefits. Mortgage interests, loan origination fees, points, interests on credit lines, and interests from credit cards used for the property-related expenses can be deductible. If you make loan payments on rental properties, there are 2 components to the payment. There’s a portion going to an interest expense and principal. You may see it looking at your statements monthly. Unluckily, you cannot deduct your payment’s principal portion. But, you may deduct interest portion.
Depreciation
Depreciation is actually a rental estate tax deduction for hypothetical wear and tear on buildings as if it’s an expense. Even if you might not be encountering costs for covering actual maintenance expenses, the accounting principles let you take advantage of eventual costs through depreciation. Knowing what depreciation is and having records is important and you must turn to your tax professional or CPA for help. Generally, you could depreciate the value of the rental property minus the land’s cost evenly over 2 decades like straight-line depreciation.
Insurance
Any kind of insurance is known as an expense or tax deductible for real estate. It includes special perils insurance and basic hazard insurance like hurricane or flood coverage and liability insurance. Insurance for rental properties is usually 15%-20% more than the policy for owner-occupied policy.
Homeowner Association Fees
If rental properties are situated in a community, which charges any type of homeowner association fees, PUD fees, condo fees, and much more, such are deductible expenses. IRS considers it to be necessary to maintain the property. HOA fees differ depending on your place, unit’s size, and amenities included, yet the average fees for HOA for single-family home are around $200-$300 monthly. Aside from that, you might deduct the items needed by HOA. For instance, several HOAs need expensive for the rent signs, which meet particular specifications. Such sign expenses could be deductible.
Supplies
Supplies are somewhat a miscellaneous, which may include anything from office to hardware supplies. A lot of supplies would be used directly on a particular property and deductibles to properties itself. A good example could be the driveway sealant if the can’s used on the property. Some supplies could be applicable to some or all properties and deductibles to businesses as a whole. A good example could be computer printer paper that cannot be allocated to a property, yet it’s used for everything related to the business.
Those are just some of the many real estate tax deductions that you should know. If you want to know the other deductions, make sure to search online.