Note: I am not a licensed accountant. You should consult a professional licensed accountant for all of your tax and investment matters. This article should be used for nothing more than an idea of the kinds of things you can write off on your rental property investments. It is not in any way meant to be an instructional manual for your taxes.
It’s tax season! Nothing is more exciting for rental property owners. Why? Because we are reminded how amazing rental properties are for tax benefits! They’re way better than just about any other taxable investment assets. Okay, well maybe it’s just us nerdy ones that actually get excited about it.
Why are rental properties so amazing when it comes to tax benefits? Two reasons:
- Rental property income is considered “passive income” by the IRS. Passive income is treated much more favorably than active income (“active income” includes things like W2 income and income from flipping properties).
- Residential rental property is the only investment asset that both appreciates and depreciates at the same time. Both put money in your pocket! Everyone is familiar with appreciation—the value goes up on your property, and that increase in value is money you can keep. Depreciation is a little trickier, but in short, the IRS assumes there will be continued wear and tear on your rental property throughout its life, and they offer you a level of compensation for that wear and tear in the form of pretty substantial write-offs. This isn’t literal wear and tear—if you keep the property pristine, that doesn’t count against you. The details on the write-off are tricky, but just know that you end up writing off that amount for depreciation on your taxes, which in turn increases your return!
For more information on why depreciation is amazing and a little bit more about how it works and how ultimately your rental property income usually ends up becoming tax-free income, check out “One of the Biggest Financial Advantages of Owning Residential Rental Properties.”
Now it’s time for a list of things related to a rental property that can typically be written off on your taxes. The reason write-offs are important is because they decrease your taxable income on the properties. Meaning, the more the write-offs, the less you have to pay in taxes!
The purpose of this list is not only to help ensure you include everything you can in your write-offs, but also to alert you to how many write-offs there really are for residential rental properties in case you are shopping for investments and not completely convinced yet of how great the tax benefits on rental properties are yet!
I’m going to make this note several times throughout this article, in one way or another: This list should not be considered all-inclusive or official. Again, I am not a licensed accountant, and this list should be used only as a guiding/starting point. Consult a licensed tax expert before concluding a final list of write-offs.
25 Items You May Be Able to Write Off for Rental Properties
Here are 25 things that you may be able to write-off on your rental property investment!
- Management fees (e.g. property management)
- Homeowner’s association (HOA) or condo fees
- Property taxes
- Pest control
- Mortgage interest
- Other interest
- Bank fees
- Education/professional development
- Leasing fees
- Legal & professional fees
- Meals & entertainment
- Automobile/car expenses