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"How to Maximize Your Rental Tax Deductions"


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Multifamily rental tax deductions are the proverbial icing on the cake. One of the greatest benefits of long-term investment real estate is that much of your expense is tax deductible, even financed expenses that did not come out of your own pocket in the first place!


LIST OF RENTAL PROPERTY DEDUCTIONS


Always consult your accountant, because I am not one. That said, here are the rental property expense items that you would typically be able to claim as deductions on your federal tax return:


HOW TO MAXIMIZE RENTAL PROPERTY TAX DEDUCTIONS


First and foremost, get an accountant. Beyond that, here are some random tips on rental tax deductions.

  • Log your mileage when driving to/from your properties.
  • Remember that financed expenses can also be deductible
  • Meticulously maintain your cash flow / budgeting spreadsheet so that all your revenues and expenses are itemized.
  • Retain receipts and invoice copies for everything
  • Make sure your filing system is organized such that you can find anything you may need.

The bottom line is that most of your real estate expenses are deductible. Between your mortgage interest deduction and all the other tax benefits, you might be in line for a nice tax refund. My recommendation is, when in doubt, log all expenses on your spreadsheet tool, and let your accountant tell you what's deductible and what's not.

Click here to download a copy of the monthly budgeting spreadsheet I use (note: you'll need Adobe Reader...to download a copy, click here).



FINAL THOUGHTS


The ability to deduct expenses and investment property depreciation is what makes real estate a solid investment strategy. You see, when you are an employee, your income is taxed, and whatever is left over is yours to spend. With real estate (or any small business for that matter), you essentially spend first, and then you get taxed on the balance.

It's an overly simplistic explanation for sure, but you get the point. Rental tax deductions like the mortgage interest deduction really serve to maximize your cash flow, and you need to take advantage of them as much as possible.




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10 Responses to How to Maximize Your Rental Tax Deductions

  1. Dino says:

    Hey this is good info on rental property tax deductions but I have a question about the mortgage piece. I see that the interest is tax deductable, but not the principal payments. If I pay extra to the principal each month, would the extra amount be deductable, or does the tax deduction only apply to the interest piece??

    • alank856 says:

      Hi there – Thanks for checking my site out. No, unfortunately only the interest portion of your mortgage payment is tax deductable. Although paying extra toward the principal every month is an excellent idea (I do this…), there is no extra tax benefit. The benefit is that you can have your loan paid off much earlier which of course will save you thousands of dollars in interest expense over time.

  2. Don Zhao says:

    Hi there,

    Is it true that you pay higher taxes in the US when selling a property under the name of an LLC?

    Thanks,

    • alank856 says:

      Hi – no that is false. A single member LLC is not considered a corporation for tax purposes, so individual tax payer rates will apply for capital gains. As long as you’ve owned the property for at least a year, your capital gains tax liability will be 15%.

  3. Don Zhao says:

    So if an LLC has two members, such as a couple, is it considered as a corporation?

  4. CJ says:

    Great stuff here! I just stumbled on your site. I was looking for info about rental tax deductions and this is the best I’ve found. Good job!

  5. RH says:

    Both my husband and I owned homes prior to marriage. Now I rent my home out for the entire year. My home is not a second home. We file jointly. My question is, where do I list the mortgage interest from the home I rent out? Do I only list it in the rental property section or do I also list it in the home owned section?

  6. dylan says:

    Howdy very nice website!

  7. AJ says:

    Good day very cool web site!! Man .. Excellent .. Superb .. I’ll bookmark your site and take the feeds. I am happy to find out so much helpful info right here. good strategies, thank you for sharing. . . . . .

  8. Bbaker says:

    i took out a LOC on my home to pay cash for 2 rental properties. i am told this interest is not taxable. this does not seem fair. am i correct

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