Last month we talked about some of the great benefits of being a landlord, and in this blog, we are going to focus on the additional tax breaks you can enjoy. These federal tax deductions are not just for Anchorage landlords, and can quickly add up in a great way.
Anchorage Landlords can deduct loan interest and points
If you are like most landlords, you have a mortgage on your property, and the interest on that loan will typically be the largest deduction you will claim on your taxes. Additionally, any buy-down points you purchased when you bought the property or refinanced it can be claimed as well.
- The interest on a HELOC used for any property repairs of improvement can be deducted.
- If you use a credit card to buy items for repair or maintenance, you can deduct the interest on your taxes.
Anchorage Landlords can deduct repair and maintenance expenses
Repairs are considered anything you do to the property to preserve its current condition. These are different from property improvements in this way: replacing a broken window is seen as a repair. Replacing all of the old windows in a unit is considered an improvement to the property. Repairs can be deducted in the tax year they were done. Improvements must be depreciated over the course of 27.5 years or until the value of the improvement has been recouped. Here are some examples of standard repairs:
- Painting and spot patching walls
- Plumbing repairs
- Heating system repairs
- Labor costs involved with repairs
- Rental fees for tools or equipment directly related to the repairs
Maintenance expenses are not directly related to fixing anything instead they are for things that routinely need to be done to maintain the property: Here are a few examples:
- Landscaping
- Snow removal and ice treatments for driveways and walkways
- Tree trimming
- Pest control
- Light bulbs for common areas
- Smoke detector batteries
- Duct-cleaning
- Heater and boiler maintenance
Anchorage landlords can deduct management fees
If you are looking to get into the rental business and want to bring in help to manage that property, you can deduct what you would pay a property manager or even an on-site manager. Here are some examples of management fees you can write-off.
- Condominium Association Fees
- Property management company
- Individual property manager
- On-site manager
- Special Assessments
These are some of the top expenses you can write off as a landlord, but they are by no means an exhaustive list. Here are some additional deductions to consider. Remember that for every item you want to deduct on your taxes, you MUST have a receipt for it. If you do not have the receipt and you get audited, you will most likely have to pay back the money you deducted as well as a penalty.
- Depreciation of Assets
- Taxes
- Insurance Premiums
- Utilities not paid by tenants
- Travel Expenses
- Vehicles
- Legal and Professional Fees
- Office and Operating Expenses
- Advertising
- Commissions
- Start Up Expenses up to $5,000