8 Profound Tax Advantages of Being a Landlord

But there’s one segment of our economy that you may want to take a second look at in coming months and years: real estate.

Of course, there are several ways to invest in real estate, including wholesaling and commercial properties, but I want to highlight investing in rental property.

This is especially important these days because we’ll face two contradictory messages in regards to becoming a landlord, as up to 31% of renters didn’t make their May 1 lease payment according to CNN, and we could see that increase drastically month-to-month.

At the same, we’re going to see a flood of properties at favorable prices from motivated sellers during the coming recession, which always spells opportunity for savvy investors.

So, putting the ability to cash flow when your renters pay every month, being a landlord has some huge advantages from tax planning standpoint.

Today, I want to highlight 8 of those tax benefits of being a landlord:

1. Mortgage Interest Deduction

The amount your pay in mortgage interest is deductible, as well as fees and points you paid for obtaining your loan. This is one of the largest deductions come April 15 (every other year!) for landlords.

2. Property Tax

The property taxes you pay to your local or state government are deductible.

3. Insurance Premiums

Homeowners insurance and other forms of property insurance are deductible as they’re considered ordinary and necessary rental property expenses.

4. Depreciation

Depreciation is a capital expense. It is the mechanism for recovering your cost in an income-producing property and must be taken over the expected life of the property (residential property over 27.5 year and commercial property over 39 years).

You can begin to depreciate rental property when it is ready and available for rent (but not land).

5. Repairs and regular maintenance

Not only are home improvements deductible (via depreciation), but general maintenance and repairs are a separate deduction, as labor costs, materials, etc. can be factored into your tax planning.

6. Utilities

If you as a landlord pay for water, gas, heat, or electric (many don’t but some will), those are deductible, as well as cable, internet, etc.

7. Professional and legal fees

If you hire a lawyer, financial advisor, Realtor, property manager or even a humble, hard-working tax planner to assist you in your rental property venture, the expenses and fees are tax deductible.

8. Other deductions

A host of other tax deductions exist for landlords, including travel costs and office space costs, whether that office is from a fancy office or a corner of your living room at home.

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If you’d like more information about the tax advantages of owning rental properties or to schedule a consultation with my office, click on this link to schedule a call.