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Tax Deductions for Landlords
by Mark Minassian, CPA

One of the biggest benefits of owning rental property is that you can deduct expenses that are normally nondeductible for personal residences. With personal residences, the only deductions that owners are entitled to are real estate taxes and mortgage interest. However, with a rental property almost any expense related to the rental property is deductible.

If you look at IRS Schedule E (which is where individuals report rental income and expenses) or IRS Form 8825 (rental income and expenses for properties owned by partnerships, S-Corporations, estates and trusts), you will see a list of allowable rental expenses. These include:

  • Advertising
  • Auto and travel
  • Cleaning and maintenance
  • Commissions
  • Insurance
  • Legal and other professional fees
  • Management fees
  • Mortgage interest
  • Other loan interest
  • Repairs
  • Supplies
  • Taxes
  • Utilities
  • Depreciation

In addition, there are other deductible expenses that many landlords are not aware of. These include:

  • Condo fees
  • Private mortgage insurance (PMI)
  • Landscaping
  • Snow removal
  • Trash removal
  • Amortization

However, there are items that are never deductible as a current expense, including:

  • Land
  • Principal payments on mortgages and other loans
  • The purchase price of the property (it must be depreciated)
  • Improvements to the property (must also be depreciated)
  • Closing costs incurred when obtaining a mortgage (these must be amortized)
  • Down payments made for purchasing the property (goes towards the purchase price, which must be depreciated)

Landlords have a whole arsenal of deductions that can be used to offset rental income. Of course, the deductions must be related to the rental property and must not be personal in nature. Care must be taken because if you get too greedy, you may be flagged for an audit by the IRS or your state.

Disclaimer:  Any tax advice contained in this article is not intended or written to be used, and cannot be used, to avoid penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

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