"Writing off" stuff in taxes

[Jon S.]

I keep hearing how I as a very small landlord can just "write off" everything. You know, if my renter doesn't pay rent I can just "write off" the loss rent. And it doesn't matter how much any supplies or maintenance cost because I can just "write it off".

We have an accountant prepare our taxes so I don't know the ins and outs of it. I think I have a very basic understanding of the tax issues, but can someone double check me? 

Incoming rent is income. If I itemize I can deduct maintenance, mortgage interest, and depreciation (which has to be recaptured, albeit in inflated dollars). Unpaid rent is my income going down. Unpaid rent is not a deduction.

When I "write off" something, I don't magically get all of my cost back. It is just a deduction from my income. To keep it simple, if I have $1,000 in maintenance, I don't save a $1,000 in taxes. Say I'm in a 25% marginal tax bracket. My maintenance deduction means that I don't pay taxes on that $1,000.  I save a $250  ( 1,000 * 0.25 ) and that maintenance still cost me $750. 

I keep hearing how much money I'm making and I don't know where it's at.

[Christopher Smith]

You make your money based on solid economics, not tax deductions. 

You're right uncollected rent is not a deduction if you're on a cash based accounting method which I'm that sure you are. You're also right a deduction is typically only a benefit to the extent of your marginal tax rate.

Lots of folks (chuckleheads for the most part who are usually the most uninformed) like to boast about taxes it apparently makes them feel important. Just base all your investment decision on sound economics and let the taxes take care of themselves. If you have a solid tax preparer you should be fine. It's not rocket science after all.