Benjamin Franklin famously noted that nothing is certain in life except for death and taxes. Yet on a more positive note, we can all be certain of tax deductions. For landlords, especially those managing midterm rental properties, understanding and maximizing available tax deductions can be a game-changer. Midterm rentals, which cater to tenants looking for stays of a few months to a year, often incur unique business expenses and renovation costs that can be strategically deducted. Let's explore the tax deductions available to landlords focusing on business expenses, rental improvements, and benefits for pass-through businesses, with specific considerations for those operating in the midterm rental market.
Business Expense Tax Deductions for Landlords
Landlords who keep meticulous records of their expenses should be able to deduct business-related expenses including:
- Advertising and Marketing Expenses: This includes paid listings, paid social ads, newspaper ads, etc.
- Maintenance and Repairs: Think of expenses such as mowing the lawn, HOA fees, smoke detector batteries, broken HVAC or plumbing.
- Insurance: Your landlord insurance policies are tax deductible.
- Management Fees: For landlords who use a property manager or software, you can deduct the expense.
- Travel expenses: This is for out-of-state or road trip travel costs specifically to check on your rentals.
- Utilities: This includes electricity, gas, and sewage expenses- even if the tenant reimburses you.
Learn more about business-related expense deductions for landlords.
Rental Renovation and Improvement Deductions for Landlords
For landlords looking to make improvements to their rental properties, there are two pieces of the tax code to take note of:
- Section 179: This piece of tax code allows businesses to deduct the full purchase price of long-term personal property purchased or financed during the tax year. Think kitchen appliances, carpets, drapes, blinds, lawnmowers, etc.
- Bonus Depreciation: Depreciation is a tax deduction that allows businesses to spread out the cost of a long-term asset over the life of the asset, while bonus depreciation allows businesses to deduct a percentage of the cost of eligible purchases the year, they acquire them. That percentage fluctuates, but from now until December 2022, it is 100%.
Learn more about Section 179 and Bonus Depreciation and how they impact rental renovations.
20% Pass-Through Deduction for Landlords
Landlords who own their rentals in pass-through businesses, such as LLCs, S-corps, and partnerships, can potentially deduct 20% of their business income, which could have a significant impact.
Learn more about the 20% pass-through deduction and if you qualify.
For more tax deductions and tax help, check out our Tax Page. For more resources on managing your rental property, check out our Investor Resources.
