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10 Ways to Save at Tax Time with Rental Properties

Updated: Feb 19, 2021

With tax season upon us, there's never a better time to explore the super savings and incentives you have with real estate investments.

Many investors love investment rental properties because they offer fantastic returns on their investment and a monthly paycheck. But did you know there are fantastic tax advantages to owning rental properties? Real estate offers the most tax advantages over almost any other asset class. But, just like any other tax deduction, you have to know what to track and what to claim. Here is a list of some of the great tax advantages that owning rental properties offers:

  1. Insurance. Any premiums you pay throughout the year are tax deductible. Any type of property related insurance – fire, flood, liability, etc.

  2. Depreciation. Even though in almost all circumstances your property value is actually increasing, according to the IRS, you can claim a certain amount of depreciation each year. This accounts for wear and tear on the property even if you do keep in excellent condition.

  3. Professional fees. If you use a property management company, attoryney, financial advisor, accountant or another person in regards to your rental property, you can write those off.

  4. Repairs. Any repair made to property – water heater, roof, broken windows – are deductible. However, do not confuse this with improvement. Repairs are necessities that need to be done to the property. If you are replacing your ugly cabinets with shiny new ones, that may not be deductible as it’s not a repair.

  5. Property taxes. Yes. You can deduct taxes on your taxes. Any property tax you paid throughout the year on your investment property is deductible.

  6. Employees or contractors. Any wages associated with these individuals is tax deductible. If you hire someone to do repairs on the home, be sure to track not only the supplies but the expense for the services.

  7. Office space. Whether you have a home office or another office location, those expenses can be deducted. Including supplies for the office, equipment, furniture and more.

  8. Travel expenses. This one can be a bit sticky. If you travel to your property to do repairs, those are deductible expenses. If you travel to your property to do improvements, those may not be. Be sure to ask a CPA what travel expenses are deductible and be sure to track your mileage and keep all receipts.

  9. Casualty Losses. If you have any losses to your property, or some of its contents, it may be tax deductible. Theft, flood or fire are examples of where such a loss may occur.

  10. Mortgage Interest. If you have financed your property, you will receive a notice from the goverment showing how much interest you’ve paid on that property in a year. That amount is completely deductible.

The savings can be huge! Not only are you saving at tax-time, but your reaping the cash flowing benefits of your investment property throughout the year. This is another huge benefit of owning rental properties. If you choose to fix and flip, not all these deductions are available to you.

Be sure to consult a CPA or your personal financial advisor on what deductions you’re eligible to claim. They are your best resource. For a full list, visit the IRS’s website.

Interested in investing in rental properties, real estate or flipping a home to keep as a rental? Contact us. We're happy to help!


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