Landlords: Take Advantage of Tax Breaks to Maximize Profits

Savvy investors know that the key to succeeding as landlords is maintaining positive cash flow and building wealth over time. In our blog post, 5 Ways to Increase Your Rental Property Monthly Cash Flow, we outlined some tried-and-true methods of maximizing profits. Now, we want to dive deeper. There are ample ways for landlords to make the most of their investments, which we will be highlighting in our new blog category “Maximizing Rental Profits.” And we’re starting with a basic that affects every landlord: taxes. If landlords thoroughly document every allowable expense, they have a golden opportunity to reduce taxable profits, and therefore, their tax bills. This should be a no-brainer. There are ample tax deductions landlords should take advantage of, but here are ten to get you started:

• Loan interest: If you take out a mortgage for your rental business, the interest is tax deductible
• Depreciation: an allowable tax deduction for buildings due to structural decline
• Insurance: business purpose insurance is tax deductible
• Utilities: if reported correctly, gas and electricity for rental properties can be tax deductible
• Maintenance: Landscaping expenses, smoke detector batteries, light bulbs, etc. are all tax deductible
• Repairs: Plumbing repairs, fixture repairs, or even painting and spot patching are deductible expenses
• Advertising: Spending money to attract tenants is tax deductible
• Management fees: If you outsource a property manager, you can deduct the expense
• Travel expenses: If you manage rentals in other states, you can deduct the costs to travel to your properties
• Legal and professional expenses: If you work with a lawyer or accountant, those fees can be deducted

Remember, in order to take advantage of these deductions all expenses have to be flawlessly tracked. If you need help with tracking, check out the Cozy Expense Tracking Tool. For more information on landlord tax deductions, visit Landlordology or our Tax Page.