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Comprehensive Review of Rental Property Tax Deductions


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Multifamily rental property tax deductions are the proverbial icing on the cake. One of the greatest benefits of long-term real estate investing 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:

* Interest paid on your mortgage & secondary loan (i.e., your HELOC)
* PMI (which hopefully you won’t be paying in the first place)
* Homeowners insurance
* Property tax
* Utility expenses (water, sewer, common-area electric or gas, etc.)
* Mileage (keep a log in your vehicle to track your mileage)
* Attorney fees if any
* Rental unit registration fees
* LLC fees
* Repair & maintenance expenses
* Supplies (cleaning chemicals for example)
* Tenant advertising and screening costs
* Surveys
* Appraisals
* Lawn care
* P.O. box expenses
* Postage
* Exterminator expenses
* Investment property depreciation

HOW TO MAXIMIZE RENTAL PROPERTY DEDUCTIONS

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

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 property tax deductions really serve to maximize your cash flow, and you need to take advantage of them as much as possible.



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