Top 13 Rental Property Tax Deductions (2024)

Wouldn’t it be great to retire early? Or to build enough monthly cash flow via passive income so that you can finally quit your day job? It sure would!!

Having rental properties can be a great investment to help get you there. My plan to retire early is heavily dependent on rental property income. Right now I am specifically buying out of state rentals because the city I live in is just too hot!! There are no deals here. I won’t let that deter me from reaching my goals though. I love having rental properties! If you purchase properly, you can get some really awesome returns, just look at my last turnkey rental I boughtand see for yourself. If you decide you want to get a rental property it is imperative that you are aware of all the Tax advantagesthat are out there for us real estate investors to benefit from. Taxes!! Love ‘em or hate ‘em. They will always be there!

There are however many benefits of having rental properties including all the cool tax advantages that come with owning rentals. Today I will show you the many tax deductionsof rental property. It would be very beneficial for you to take full advantage of the tax deductions available to you.

Please note I am not a tax professional, attorney or CPA. I am simply a real estate investor giving you a general overview on the many tax benefits I have learned about from having my own rental properties. If you wish to seek professional advice, contact a tax professional.

Here are the Top 13 Benefits of Rental Properties.

1) Depreciation

• This is a beautiful advantage in that the IRS allows you to deduct the actual cost basis of the property (The structure, not the land) spread out into equal portions totaling 27.5 years. If you divide your total structure cost by 27.5, this is the amount you can deduct yearly. However be aware that recapture of the depreciation will occur in the year you sell the property. This means you will have to pay back all the taxes that you saved from using the depreciation deduction. If you are like me, you will hold the property forever and ever and won’t have to worry about it.

2) Loan Interest / Points

• If you finance your property, the mortgage interest paid to the lender can be deducted. This may very well be the best deduction you have available. Depending on your loan, you can pay 10k or more on interest alone. That is a big fat deduction! On top of that, if you purchase buy down points on your new mortgage, you can deduct that as well.

3) Insurance Premiums

• Any insurance premiums you pay for your rental property are all deductible. These can include Fire/theft/Flood insurance, landlord liability insurance, Theft Insurance, Worker’s compensation insurance and a few others. As long as the insurance is related to your rental business, it can qualify.

4) Property Taxes

• The taxes you pay yearly on your property are all deductible. If you have a mortgage it can be as simple as looking at your tax statement to see how much real estate taxes you paid. If you own the property free and clear you will need to maintain receipts and proof of the taxes you paid.

5) Repairs/Improvements

• Any repair or improvement you do on your property is deductible. Be sure to keep all receipts and maintain proper records. Also be sure to keep the repairs separate from your Improvements as they differ on the deductions. Repairs are fully deductible while Improvements you will likely have to depreciate. Be sure to speak to your Tax Professional regarding the differences.

6) Travel

• If your rental property is close by, you can deduct all mileage expenses to and from your rental property. Be sure to keep accurate logs for this. If your rental property is far away, you can deduct airfare, hotel bills, car rentals and meals. Again be sure to log everything, keep receipts and provide some sort of proof you traveled for your rental business. If you need a spreadsheet to keep track of this stuff, feel free to use mine.

7) Utilities

• If you are paying for any of the utilities on your rental property, these expenses are deductible. This can include electric, gas, water and trash. In most cases though your tenant is probably paying these. If so, you cannot deduct them.

8) Home Office

• If you conduct rental business in your home, depending on ifyou meet certain requirements, you can use this as a deduction. Just be aware by utilizing this deduction, it may increase the chances for audit. Just be sure you actually use it to conduct business and consult with your tax professional first before attempting to deduct this one.

9) Advertising

• If you pay for any advertising for finding tenants or placing ads you may deduct this as well. Just be aware that if you are paying for advertising, you should consider alternative free methods to advertise your rental. I have successfully used craigslist, trulia and Zillow to find tenants and its all FREE.

10) Employees/Independent Contractors/Property Management

• If you hire professional services for conducting repairs, a property manager or anyone else who performs services on your rentals, you can deduct the expenses. If you want to make your rental property as passive as possible, I highly recommend you find a good property management company. Make sure your property management team has these qualities to have better results.

11) Legal Fees

• The time will come when you need hire legal representation whether it be from a lawyer, CPA, advisers or any other legal professional. These expenses are all tax-deductible. Hopefully you won’t ever need a lawyer or have to evict anyone!!

12) Casualty and Theft Losses

• If your rental property is ever damaged or destroyed from some sort of natural disaster you can most likely deduct at least part of your losses. This can be dependent on how much damage has occurred and what your insurance covers.

13) Commissions

• If you ever provide a commission for example offering a cash incentive to your tenants for finding an approved new tenant upon departure, you can deduct these commissions as well.

When starting out with your first rental, you may be tempted to do your own taxes as I did. I thought it was a great idea and of course I thought I was doing them properly. As my rental portfolio grew, I decided to hire a tax professional and it was the best decision I ever made. It was because of my CPA that I learned about most of these deductions not to mention he showed me other areas in my taxes I was doing incorrectly. Whoops! So learn from me folks, its best to hire a professional to deal with taxes. Just be sure to keep all receipts and log EVERYTHING!!

If you want to read specific tax details on each of these items, please visit the IRS website.

Did you learn about any new rental property tax deductions I mentioned above?