Time left to file your 2014 taxes is almost up, and for all of you last minute types, we have some property owner tax tips for you! Owning rental properties is one of the biggest investments you can make in your lifetime and essentially makes you a small business owner in the eyes of the government. A successful rental property can pay off big, and therefore, Uncle Sam will want his cut! Stay ahead of the game by understanding how your investment is taxed, and knowing what rental property tax deductions you are entitled to.
Property Management
Employing a good Tulsa property management company is not only a great investment in the success of your rental property business but is also a great tax break! You can deduct any associated fees on your 2014 tax return, including monthly management fees and even new tenant leasing fees.
Maintenance and Repair
Just like property management fees, you can deduct expenses you incur relating to your rental property on your 2014 taxes. Any services or supplies required to keep your rental property up and running are obviously important to your business, and therefore, count as deductions.
Rental Property Improvement
Even if hardware you bought or improvements you made were not required for normal maintenance, many can still count as tax deductions in 2014. Renovations like new flooring, a paint job, or even landscaping all have to do with improving the earning potential of your investment. Talk to a qualified tax professional about what improvements to your rental property can count as tax deductible.
Interest and Insurance
This is a big one! Expenditures like management or repair clearly qualify as services performed for your business, but don’t forget that your mortgage lender is performing an equally valuable service! Their fee to you is simply the interest charged every month, and therefore, it can be deducted. Property and liability insurance is also a key service you pay for every month, so remember to deduct that as well. Save hundreds—or even thousands—by deducting the interest and insurance off your rental property’s mortgage this year!
Depreciation
You can’t deduct principal payments on your property, you can deduct rental property depreciation. This can be a little hard to wrap your head around, but here’s the basic concept: the government doesn’t want you to deduct the entirety of your rental property purchase all at once, but, you can deduct it gradually year by year. You are allowed to do this essentially because the IRS assumes that your rental property has a finite profitable lifespan that is being steadily used up. You are still allowed to deduct depreciation when the property is vacant but not if it’s employed for personal use (i.e. you or a family member chose to live there temporarily). Work with a qualified Tulsa tax professional to better understand how to calculate and deduct your rate of depreciation.
Casualty Losses
In the unfortunate event that your property suffers damage from fire, theft, or natural disaster, you can typically deduct some or all of the damages you incur. The amount you are able to deduct will be based upon the extent of the damage and whether or not it was covered by insurance. Keep in mind that you can also deduct any expenses like legal help or other services related to this event.
For more information, check out Every Landlord’s Tax Deduction Guide
(Tax image courtesty of 401kcalculator.org)
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