Rental Property Tax Deductions

Own residential rental properties? This article discusses how income from those properties impacts your taxes.

What Constitutes Revenue?

Generally, rental income is defined as any revenue you receive from the occupancy or use of residential property. Rent, obviously, is included in that revenue. Many owners are surprised to learn revenue also includes rent advancements, expenses paid by a tenant and any security deposits not returned to the tenant. In fact, revenue can also include amounts paid to cancel a lease, even if you had to sue the defendant to get it.

Yeah, Yeah, But What Can I Deduct?

Tax deductions associated with rental properties are strikingly similar to those found in any business. Technically, you can deduct any expense reasonably necessary to "manage, conserve or maintain" the property. Obvious deductions include mortgage payments, cleaning expenses, insurance premiums, service payments such as landscape maintenance, repairs, maintenance, etc. Overlooked rental property deductions include:

1. Expenses incurred in finding tenants,

2. Commissions paid to third parties that arrange for tenants,

3. Paying your accountant and/or lawyer,

4. Mileage for driving to and from the property [I said, "No more parties!"]

5. Depreciation of the property,

6. Depreciation of items in the property such as washing machines, furniture, etc.

Imaginary Rent Deduction

A few creative property owners have suggested that they should be able to deduct their customary and standard monthly rent if the property is empty. The argument goes, "If the property is empty, I am not making revenue and should be able to deduct the $1,500 that I am missing out on." At first glance, this almost makes sense. Sadly, it doesn't fly from the perspective of the IRS. Since you are not receiving revenues, your total revenues for the year will be reduced by the loss rent. You can't double dip by deducting the $1,500 from the already reduced yearly revenues. The only things you can deduct are the expenses you incur during this period, and only for so long as you are actively trying to rent the place.

Rental properties are a great investment. Even more so if you stay on top of your taxes.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

In The News:


10 Thoughts on Tax Offer in Compromise

Beware of advertisements that claim to settle tax debts for... Read More

Truly Bizarre Taxes: The Tax on Illegal Drugs

One can never underestimate the enthusiasm that politicians have for... Read More

Understanding Marketing Tax Deductions

Marketing is a necessary expense in running practically any business... Read More

10 Tax Tips to Reduce Costs and Increase Income

No one likes paying tax. Everyone understands that tax is... Read More

2005 Ford Escape Hybrid Certified For Clean-Fuel Deduction

If you are environmentally conscious and purchase a 2005 Ford... Read More

Small Business Tax Deductions for Year End 2004

As a small business owner, it's wise to familiarize yourself... Read More

Tax Time Tune Up

Excerpted from the new book, "How to Do Space Age... Read More

Business Tax Loophole: Leasing Assets To Your Corporation

While there are many equally valid reasons to incorporate, saving... Read More

Tax Deduction for Alimony Payments? - Yes!

Over 50% of marriages end in divorce in the United... Read More

Tax Tips - Which Tax Form Is Right For Me?

IRS Tax forms can be confusing.Am I a 1099 or... Read More

E-commerce Taxation

The means and types of businesses have transformed with advent... Read More

Anticipating Your IRS Refund Can Cost You Plenty

While accountants are reaching for aspirin, millions of Americans are... Read More

Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)

Background issues of access to recordsTo assess the records at... Read More

Tax Trap #3 -- IRS Penalties, Interest and Love Letters

As a small business owner or self-employed person, one of... Read More

Surprising Truths About Tax Preparers

Choosing the right tax preparer for your business is a... Read More

Tax Jokes and Quotes

Do you realize that some tax forms ask you to... Read More

Employment Taxes ? What Are They?

If you have employees, you are responsible for paying a... Read More

Identity Theft ? Impacting Your Taxes?

If your identity is stolen, your finances can quickly become... Read More

Tax Deductions - Mr. C.P.A. Can I Deduct a Pizza? You Too Can Deduct Your Fun By Using Tax Tips

Recently, I stumbled across a concept that could change your... Read More

Tax Records - What You Should Keep And For How Long

Many taxpayers are confused about how long they should keep... Read More

Section 179 ? Tax Relief From Depreciation Rules

"Depreciation." For business owners, this word is the one most... Read More

Save Money on Taxes - Let Uncle Sam Pay for Your Fun!

"Deducting Meals and Entertainment"O.K. You've been working really hard on... Read More

Failure To Pay Employment Taxes ? Penalties

As an employer, you must pay employment taxes if you... Read More

Knock-Knock-Knock

Knock-Knock-KnockWho's there?The IRS!The next quarterly payment of estimated income tax... Read More

Reducing Taxes Through Dividend-Salary Mix Calculations

Should I take wages or dividends from my privately owned... Read More