Almost every landlord does not have enough knowledge about tax deductions. As a result, they are paying more tax than they have to. Rental property is not a myth, 100% legal and is a practical way to pay rental property taxes.

Here are some of the possible rental property tax deductions:

Mortgage Expenses – Not all mortgage payments are deductible. There are certain cases like a part of the payment that goes in paying down the principal is not deductible but the portion paid in the interest is. Form 1098 which shows the amount of money you’ve paid in interest that are usually sent by the mortgage company each year is also deductible. Part of the payment that goes into an escrow account to cover taxes and insurance is also deductible only if you notified about it to your mortgage company.

Travel Expenses – The money spent traveling every time you collect a rent or maintain a rental property is deductible. If the purpose of the trip was to improve the rental property, the travel expense for it is not deductible.

Repair – If your rental property have to do repairs like fixing floors, leaks, replacement of broken windows, and other kind of repair that might hinder the property’s performance, you can get a rental property tax deduction.

Loss – You may have suffered major loss due to flood, and other natural calamities. If this happens, you can claim a tax deduction for this incident either for the basis of the loss or the total part of the loss. The amount being deducted also depends on the insurance claims.

Insurance – Paying for a premium insurance? You can deduct the insurance amount in your property rental tax. Theft, flood, fire insurance and landlord liability are covered as a tax deductible amount.

Home Office – If you have your own home office made for property renal business, claim it as one of your expenses and as a taxable income, so property rental tax deduction is necessary.

Services – The fees you pay for property management, attorney, real estate investment advisors, and other professionals providing service to your rental property are all deductible.

Non-Deductible tax are as follows:

1.Modifications expenses. Expenses like adding a new room, adding a fence to the rental property, modifying the look of the property and anything modifications done are not treated as repair therefore it is not deductible.
2.Vacancy that resulted in loss of income.

Tips:

For these to be properly deducted, you must keep all the records, receipts or any changes on your rental property. You will need to provide these things to the IRS when you file tax forms. Make sure it defends your right to get tax deductions and proves that it is related to your rental property.

If you are able to use these tips then you will almost certainly be able to reduce your debt to income ratio when purchasing rental properties.

These are just the common rental property tax deductions. Some states have less tax deduction, some even have more. Check your local state about tax deductions or seek advice from you local tax advisor.

If you haven’t done any of the deductions then you are paying more than what you should have saved. Start producing your deductible tax amounts today and save more than 50% in your rental property tax.