Last updated: April 26, 2023
Buying real estate is rarely a bad decision. If you purchase a house that requires minor repairs, you’ll have an excellent return on your investment. You can renovate it and resell it or rent it out, creating continuous cash flow.
But how about its tax purposes?
Few know and take advantage of the tax deductions that come with real estate.
Let’s take a look at what expenses you can deduct
Insurance
If you’re a landlord and receive rental income from your home. Your homeowners’ insurance, on the portion of the property used as a rental, becomes tax-deductible. When you own several properties and those properties are used only for rental income, then all of the homeowners’ insurance is tax-deductible.
Advertising
Staging, brochures, ad placements, photography costs, and open houses. They are all tax-deductible.
Cleaning
If you own a residential rental property, you can deduct 100% of the costs you incur to clean the property. However, you must include it on Schedule E you prepare to report all rental income and other rental expenses.
Repairs
Generally, repairs and maintenance are fully tax-deductible in the year they’re completed if they’re done in order to keep your property in good operating condition. They wouldn’t qualify if they are improvements meant to increase the value of the rental property.
Management fees
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Real estate taxes
You can claim your real estate taxes on your federal income tax return. But limits apply and you have to itemize your personal deductions too.
Mortgage interest
The Tax Cuts and Jobs Act (TCJA) affected this deduction somewhat when it went into effect in 2018, but the legislation did not eliminate the deduction from the tax code entirely.
And finally trips to and from the property: the miles you drove in order to take care of your properties are also tax-deductible if you simply keep a mileage log. With MileageWise you can track your mileage the most accurate and you can even make up for your forgotten drives!
Choose the automatic trip tracking with the MileageWise mileage tracker app, to completely automatize the process. If you forgot to log a trip you can retrospectively edit or even reconstruct mileage logs. You can reconstruct months or years worth of mileage logs!
And if you’re still worried you couldn’t handle keeping track of your mileage, outsource it to our experts. They will be more than happy to help!
Some of those costs need to be capitalized and depreciated over time, but it’s still important to remember: You are paying more in taxes by not claiming all the expenses you are paying for each property. And if you sell the property you have to prepare a gain/loss calculation, which you should have done if you took a depreciation anyway. So… You have nothing to lose! Furthermore, you’ll be fully prepared for the time when it comes to selling your property.
Consult a tax professional today so start deducting your real estate related taxes!
