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An Owner’s Guide to Rental Property Tax Deductions

Hanover Rental Property Owner Doing Her TaxesOne of the major advantages of owning Hanover rental properties is that, come tax time, you may capitalize on deductions that other taxpayers cannot. Yet, to benefit from these deductions, you should first understand what they are and how to have your numbers ready before you begin filling out your return. In this guide, we will discuss the tax deductions that rental property owners may utilize and how they can help reduce your tax liability every year.

Common Expenses You Can Deduct

Determining your property’s common expenses is crucial to optimizing your cash flows. It can also aid you at tax time because you can deduct most of them on your return. Budget expenses that are also tax-deductible include:

  • Repairs and maintenance. Any amount you spend to maintain the condition of your property is commonly a deductible expense. This covers fees paid to service providers, contractors, along with others. It is important to know that improvements – mostly significant ones – are not deductible as expenses. Instead, they must be amortized as capital improvements.
  • Insurance. Insurance premiums for your landlord insurance policy, including any fire, flood, or personal liability insurance, are deductible expenses.
  • Utilities. You can deduct utility payments on your tax return if you pay money for any utility service, such as water, garbage, electric, or gas. Utilities paid by your tenants are not deductible.
  • Advertising. Any money you spend to market your property and/or find a new tenant is a deductible amount. This includes if you spend on a web domain or website hosting, online ads, and professional fees for photography or video tours.

Additional Tax Deductions

Along with common expenses, there are a handful of other deductions that rental property owners may use to help reduce their tax liability. These tax deductions include:

  • Mortgage interest. Any mortgage interest you pay on related loans is tax-deductible for investment properties. This is usually one of the most lucrative deductions for rental property owners.
  • Depreciation. Another reasonable deduction that rental property owners may take is depreciation. All properties are likely to depreciate over time due to wear and tear. The benefit is that you may deduct a certain amount for this depreciation over the life of the property. You can also acquire depreciation on capital improvements, such as appliances, fences, and renovations.
  • Legal and professional fees. You may also deduct money given to attorneys or other professionals who execute services related to the management of your rental property in the same way that you can deduct expenses paid for repair work or landscaping. Most costs associated with eviction, Hanover property management, and tax preparation are also deductible.
  • Travel. Owning rental properties normally takes a lot of back-and-forth travel, whether you live in another state or only a few miles away. Those business-related miles may add up over a year and are deductible on your tax return. Just keep a log of your travel miles and any other travel-related expenses.

It is vital to keep your property-related expenses organized and in one place if you want to take full advantage of all the deductions available to you. And you don’t have to sit until the end of each year; you can start keeping track of your expenses immediately and add as you go along. Utilizing this approach can make your life less complicated yearly when tax season comes around.


Appointing Real Property Management Beacon to manage your operational expenses is another method to make tax time easier. Besides professional property management, we keep up to date with your property’s income and expenses and provide reports that can make tax time more straightforward. Contact us online to learn more!

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