7 Tax Write-Offs for Landlords to Tap Into

Who wants to pay more taxes than they already have to? No one. Yet thousands of landlords are dishing out more money towards taxes on their rental properties than necessary.

The truth is, there are all sorts of tax deductions available for landlords with rental properties. In fact, rental real estate offers more tax advantages than just about any other type of investment.

Here are 7 tax write-offs available for landlords to take advantage of, and help make the most of a rental investment.

1. Depreciation

Real estate properties tend to (hopefully!) appreciate in value over time. Yet landlords have a distinct advantage of depreciating the cost of properties over a number of years. As a landlord, you can get back a portion of the cost of rental buildings through depreciation, which basically involves deducting part of the property’s cost over the years.

The government allows landlords to take a “paper loss” of real estate value based on a model that assumes that properties will decline in value over 27.5 years. This means you can deduct a depreciation loss off the purchase price for the first 27 and a half years you own a property.

Sound confusing? Let’s say your rental building (excluding the land) costs $300,000. Your annual deduction for depreciation would be $10,909 ($300,000 ÷ 27.5 years), which would give you that much positive cash flow that you don’t have to pay taxes on. It’s a nice little perk, especially if you’ve got a few rental properties under your belt.

2. Interest

Interest is typically the biggest expense you can write off come tax time as a real estate investor.

There are a number of areas where you would pay interest, including mortgage interest payments to buy the property, mortgage interest payments on loans used to renovate the property, interest rates on credit cards used to buy things specifically for the rental property, and interest on personal loans used for anything purchased in relation to rental activity.

Considering how annoying it is to fork over big bucks to put towards potentially high interest rates, it’s nice to get a little something back in this department.

3. Insurance

Homeowners can’t write off their home insurance on primary residences, but landlords can deduct their property insurance when the tax man comes around. Just about any type of insurance you pay for your rental property can be a deductible expense. This includes theft, fire, flood, hazard and liability insurance.

If you’ve got any regular employees on staff, you can even deduct their workers’ compensation and health insurance too. So make sure you keep a copy of your insurance premium invoices and hand it over to your accountant to do the number crunching.

4. Repairs

Any cash spent on repairs and maintenance for specific improvements are fully deductible in the year that they took place. While there are certain exceptions, they typically include anything that makes the property safer or more habitable for tenants.

Examples include painting, fixing leaks, replacing windows, repairing floors, and so forth. Make sure you chat with your accountant about the specific repairs that are considered tax deductible to help you maximize your repair write-offs.

5. Home Office

You can write off any home office expenses that meets certain requirements set by the government. Not only do these expenses apply to the physical space that your office takes up, but also to any type of workshop used to run your rental business.

Whether you own your home or rent it, you can write this expense off. There are a bunch of direct and indirect expenses related to a home office that can be deducted from your taxes, including rent, depreciation, insurance, utilities, maintenance, condo fees, and security systems.

6. Advertising and Screening Tenants

It might cost you some money to advertise a vacant unit for rent, but those expenses can be written off. Not only that, but any costs associated with screening your tenants – such as pulling credit reports or getting a criminal background check – are tax-deductible too.

7. Property Taxes

You can list your rental property taxes as deductible expenses each year. Yet so many landlords neglect to list these expenses, which ends up costing dearly. Don’t forget to include this little tidbit to your list of tax write-offs.

If you weren’t aware of any of the above tax deductions, you’re probably paying way more towards taxes than you have to. Paying taxes is already a nuisance, so it just makes sense to tap into the various tax deductions available to landlords.

Have a chat with your realtor or accountant about all the rental property tax deductions out there. And don’t forget – your accounting bill is tax-deductible too!