What Are The Tax Benefits When You Are A Landlord?

You’re going to have a lot of expenses as a landlord. This is normal and expected and you can charge as much rent as the market allows so you can still make a profit when considering your expenses.

From the mortgages to the maintenance and property tax, there is quite a lot to pay for. Now, you can try to get those costs down by refinancing a mortgage, or hiring a property tax lawyer like Ryan J. Gibbs to lower your tax burden.

But, aside from doing those things, there are a number of tax benefits that you can claim that will help offset a lot of these expenses so you can increase your profit margin. To take advantage of them you have to know what they are. In this article, I will go over several of these tax benefits to help you become aware of the possibilities.

Mortgage interest deduction

As long as your property is a house or building that is lived in then you can deduct the interest that you pay on your mortgage. In other words, if you own some land for agriculture or some other use, then you can’t deduct the interest from the mortgage on your taxes.

As long as the value of the property is less than $1 million then you can claim this deduction. Landlords get the extra benefit that any loan used to make improvements on the house will also give them a deduction on the interest paid on them.

Now, where this gets a bit tricky is that if it is a second home that you are renting out you must have lived in the house for at least 10% of the time that you’ve owned it to be able to claim the deduction.

Now, if you have paid mortgage points when you closed on the house, then you can shave off about 0.25% of your rate but this is complicated and a lawyer is probably your best bet to be able to do this.

Unique deductions

Let’s say you are not a landlord and live in an apartment. If you were to break a wall by accident or cause some other kind of damage that needs to be repaired, then you are on the hook for the entire amount. But, if you are a landlord that rents out that apartment then you can deduct the cost of those repairs as it is a business expense.

Also, utilities that you pay for your tenants can also be deducted. If you include the cost of water, and electricity then you are paying that yourself and it counts as a business expense. Property tax can also be deducted from your federal taxes.

Any legal fees that you pay a lawyer to help you with your properties is also an expense that can be deducted. Surprisingly, travel expenses that you might have to pay to be able to visit your property for business purposes are deductible.