Maximizing Your Rental Deductions

With tax season upon us, your non-owner-occupied rental property can be used to greatly enhance your deductions and maximize your return.  As always, consult your accountant first, preferably one familiar with real estate investments.  Remember, as a landlord you are a business owner and should treat it as such; so there are a few things you'll need to get the most benefit.


1. Keep all receipts from expenses accrued relating to rental property as well as any canceled checks from your tenant.  You'll also need a copy of your lease agreement.


2. Report any interest relating to the rental property. Interest can even be associated with credit cards used for repairs to the property and, of course, loans used for the rental, whether to purchase or repair.


3. Report any income from the rental property and any expenses accrued from the rental property on Schedule E of Form 1040. Report all expenses related to the rental property, including repairs, property taxes, depreciation and mortgage interest.  Don't forget insurance premiums too!


4. Report any fees accrued through legal services or other professionals that pertain to the rental property. Attorney fees to draw up lease agreements and expenses from any repair contractors are also tax-deductible.  Costs of any and all repairs and upgrades performed on the property are fully deductible the same year they are executed.


5. You can deduct any travel, gas, and wear and tear on your vehicle that was used as a result of responding to a tenant's request OR accrued as a result of errands relating to the rental property.

6. Finally, report any costs related to a home office used in conducting your rental business.  For example, report costs of a fax machine, computer, or other office expenses.

The bottom line is most of your real estate related expenses are deductible.  My recommendation, log ALL of your expenses and let your CPA tell you what is and is not a deduction.