Tax Benefits on First Property?

Question

I purchased my first place in 2021, putting 5% down because I moved into the property. I plan to rent it out next year, but I wonder what write-offs I can take on a property that was not financed with investor financing. I've made a handful of improvements, but I've never done this before! I suppose it's just what regular homeowner would write off, but I don't know what that is. Would someone be willing to advise?

Jillyan MacMorris · Answer

Thank you! I'm looking forward to it!

Tim Johnson · Answer

Congrats. A great way to get started in your investing!

The taxes you file this spring will deal only with 2021 so you won't be claiming it as a rental yet. If you don't take the standard deduction (and most do these days) you could deduct the interest on your mortgage.

Looking ahead to next year, you'll file a Schedule E. Your rental income and pay-down on the principle are taxable. However, you'll be able to deduct the interest on your mortgage, capex expenses, as well as begin the depreciation. You'll be surprised at how well those will generally off-set your rental income.

Jillyan MacMorris · Answer

I plan to move out and have someone else move in to rent it. I haven’t done so yet, but I’m thinking about the taxes I’ll be filing this spring after purchasing the place last year.

Dorothy Butala · Answer

@Jillyan MacMorris  Great question!  Do you plan on living in the house when you rent it (i.e. rent rooms) or are you planning on updating it, moving out, then renting it?  Just need a little clarification before dishing out some advice :)