Rental Real Estate Expenses

If you own rental real estate property you may be wondering what all can be deducted as expenses on your tax return.  There are a few general rules about deducting rental expenses.

  • You can generally deduct your rental expenses in the year you pay them
  • You can start deducting expenses paid from the time you make it available to rent, whether or not there is an actual tenant.
  • You may not deduct uncollected rent.

When it comes to repairs and improvements, repairs may be fully deducted in the year they are paid, while improvements must be depreciated over their useful like.  A repair is anything necesssary to keep your property in good operating condition and does not materially add value to the property or substanitally prolong its life, such as painting, fixing leaks, or replacing broken windows.  An improvement adds value to the property, prolongs its life, or adapts it to new uses.  Some examples are additions of new rooms, new roof, new carpeting.

Here are a list of other expenses that are generally deductable on your tax return.

  • Advertising
  • Cleaning and maintenance
  • Utilities
  • Insurance
  • Taxes
  • Interest
  • Commissions
  • Tax return prep
  • Travel
  • Local Transportation Expenses

If you have any questions abotu whether or not expenses are deductible or if they have to be depreciated, please contact your tax professional for help.


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