Tax Deductions on a Rental Property

[Derrick Lloyd]

Hi all,

I recently got my first deal under contract, it is a SFR in St. Louis that will be held as a rental producing positive cash flow. I was wondering what some of the tax deductions I will be able to take are. I know that I can depreciate the value of the structure over 27.5 years. And I believe that I will be able to deduct all expenses related to the property (property management, repairs, utilities, taxes). Are there any other deductions I will be able to take? Will I be able to deduct some of the closing expenses, such as closing costs and inspections? Can I deduct the interest paid for the mortgage like I do for my primary residence?

My income is below 100k, which I think has an effect on how the deductions work.

Look forward to your answers!

[Ashish Acharya]

There are various stuff that you can deduct.

Rather than giving you the list, first let me say that you can deduct expenses that meets these two criterias:

1. Ordinary Course of business
2. Necessary in the course of business

Here are the list some of the items:

1. Mileage: any mileage that is associated with rental activity. Use apps like MilesIQ to keep track of it. Note: If you go to same meeting each month, you can do detail tracking for a month, and can use same detail to estimate expense for rest of the year.( If nothing changed)
2. Meals when travelling away from home - 50% is deductible unless the meal is provided to general public (like Open houses) than it is 100% deductible. Open House - Meals and entertainment (Balloons)
3. Expenses for Meeting with investor
4. Expenses For Meeting with realtor
5. Going to investors meetings. Mileage and meals
6. Money paid for RE tax book is also tax deduction.
7. Any expenses that helps you with RE investment can be deducted. Eg. HOA fee - If HOA fees are not paid, business will incur fines, so it is necessary to make profit in the business.
8. Marketing expense and advertising
9. Cleaning and maintenance
10. Commission (Expenses like commission, abstract fees,recording fees to obtain your mortgage are not deductible but rather capitalized )
11. Insurance
12. Legal and other professional fees(Tax preparation)
13. Management fee if applicable
14. Points- you generally cannot deduct full amount the first year but have to deduct them over the term of the loan.
15. Repairs (Note always do repairs rather than improvements to rental because repairs are deductible right away and do not have to depreciate over few years as done for improvements. Repairs do not have to recapture when you sell the house too.)
16. Utilities
17. Pre rental expenses ( expenses incurred before finding a tenant )
18. If you use your Car:
    1. This can include- oil changes, Maintenance, gas, repairs, parking, tolls, and depreciation. If you use personal car, make sure to keep detail record so that CPA can prorate the expenses between personal and business.
19. Any equipment you rent for rental business .Mortgage interest and property taxes
20. There are many others and depends on specific situations.