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What Tax Deductions Do Rental Properties Offer

What Tax Deductions Do Rental Properties Offer?

Litchfield, NH Resident Looks for Advice

A rental property can offer a steady income for the landlord.  In addition to the monthly rent, these types of properties come with many tax deductions that can save you money.  Mortgage interest, property taxes and any repairs are all tax deductible.  There are plenty of less obvious deductions including milage associated with the rental, insurance, utilities and loss of income when the rental is vacant.

A Litchfield resident was considering purchasing a home to be used as a rental.  First, she wanted to get a better understanding of how this would affect her taxes and the potential deductions available.

Money for Repairs and Improvements to the Property is Tax Deductible

General repairs done on a rental property are usually tax deductible.  This includes replacing appliances, painting walls, repairing plumbing issues and other general maintenance items that may arise.  Even expenses such as replacing light bulbs in the property can be tax deductible.  For larger projects, such as remodeling a kitchen, replacing the windows or putting in a new roof, these expenses should be capitalized, particularly for a smaller property.  High dollar repair and maintenance costs on a small property can be a red flag for the IRS.

Loss of Income for Vacant Property Can Be Deductible

When your property is vacant, you can deduct the loss of rent that would have been paid from your taxes.  This can help to offset the loss of income for a vacant rental property.  Depending on the accounting method that you are using, you may also be able to deduct uncollected rent.  During a time of vacancy or when changing tenants, any advertising money to find new renters can also be deducted from your taxes.

Deducting Depreciation for Rental Properties

Just like business equipment, your rental property can give you the tax benefit of depreciation.  These calculations can be tricky and there are several ways to determine the proper amount for depreciation.  While this can offer a tax savings, it is best to have a tax professional like Merrimack Tax Associates assist with this more complicated calculation.

The Litchfield resident can now make an informed decision about purchasing a rental property with this additional information.

tax deductions, taxes