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How You Can Deduct Expenses for Your New Rental Property


Landlords and property owners are looking at a tax deduction to lower their taxable income. They are looking at their expenses for the past year and noting what can be deducted from their gross income. Through deductions, the taxes they owe the government will be drastically lowered, and would enable them to take home more profit.

However, there are landlords and property owners who are missing out on these deductions. It is important for them to know about it because they can reap so many rewards from deductions. The following list summarizes the items that can be filed as deductible expenses.

Regular Expenses Incurred Monthly for Utilities and Other Bills

When a landlord or a property owner is paying for the water, sewage, garbage collection, electric bills, internet connection, and other utilities, they can file for a deduction. These utilities are expected to make a property livable, and landlords are expected to pay these bills. According to the taxation rules, any expenses to pay for the utility or maintenance of the property can be deducted from the total amount of taxes. Without paying these utilities, people would refuse to pay the rent, and it will make your property useless. Landlords and property owners should always keep their payment receipts, to serve as evidence that they have already paid their dues and present it later on for deduction.

Expenses for Maintaining and Repairing the Property

Maintaining and repairing the property on a regular basis is recommended to keep it livable, and according to tax laws, expenses incurred for these actions can be filed as a deduction. New rental property and buildings are expected to have running services, and once it is disconnected, the tenants would complain and some might leave if it happens frequently. This would affect your business, and you can file for a deduction if your goal is to make your property livable once again. The maintenance deductions can also be applied to those who own a garden at home, as landscaping services and pool cleaning services are usually covered under his deduction option.

Various Property Upgrades

Upgrading your property has two results – some might be deducted, but some might not. Energy efficiency comes into consideration whenever you are deducting expenses for the property. If you change the water tank that has been running for decades, the government can grant you a partial deduction.

Windows, on the other hand, do not fall under upgrades, but it is considered a repair. Many property owners are having issues when comparing repairs and upgrades, as they feel confused about its legal definition. What the majority of the property owners do is to use their intuition about the kind of deduction they are applying for, tagging it either as an upgrade or a repair based on its technicality.

Mortgage Interests and Deductions

Landlords and property owners are paying taxes to keep the property under their possession. According to taxation laws, these expenses can be filed as a deduction. However, you might want to work with finance professionals to find out which taxation payments can be applied for as a deduction, and to guide you with the payment system and its legality.

Advertising Cost

Landlords and property owners who are spending money to promote their businesses are eligible for deductions. According to taxation laws, all they need to do is to collect the receipts that serve as proof of their payment. Many property owners are taking advantage of this privilege, and they are filing deductions especially on their new rental property that has been advertised extensively.

Paid-for Services and Commissions

The payment incurred by a landlord or a property owner can also be tagged as a deduction. The professional fees are required to continue running the business, and tax experts are saying that it can be deducted.

Once you are able to determine which payments can be tagged as a deduction, you would notice that the revenue earned from your property rental business will drastically increase. Use the extra money that you will save for maintaining your property, and continue to provide the basic needs of those who are renting out your building.

About the author

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.