This comes as routine for many home owners and landlords, but I find when I ask various other landlords I know they often aren't taking all their deductions. Usually in the form of depreciable improvements, or in wild cases, depreciation on the house itself!
There's a book out there I got off Amazon a while back called 'Every Landlord's Tax Deduction Guide'. It has a lot of great ideas and is well worth it if your a landlord needing any assistance figuring out what is deductable, what is depreciable, and what might be illegal to decuct on your taxes. Granted my version is from 2007 and I bet there is a newer one; however, most of the items are still very current. Here's some examples to my fellow landlords to pay attention to.
Common Depreciations - Depreciable items are items which Uncle Sam doesn't let you take up front. You get to take a tax break over the improvement's useful life which can be anywhere from 2-30 years.
1. Most investment property owners depreciate the value of the dwelling itself. This is usually a very large depreciable deduction. Using the 80/20 rule (80% dwelling, 20% land) is a common way to factor it, or using the local assessed values for percentages are another way. The typical investor gets to depreciate the dwelling's cost over 27.5 years.
2. New Roof, Add-on, remodel, deck, garage, outbuilding. All depreciable over 27.5 years.
3. Landscaping, plants, fences, sidewalks, driveways, or swimming pools. Depreciable over 15 years.
4. Carpeting, vinyl and non-permanent flooring, drapes & blindes. Depreciable over 7 years.
Common Deductions
1. Repairs - If you are repairing part of the dwelling, land, or an improvement (even if your already depreciation the improvement), repairs to these items are typically always deductable during the year they are done.
2. Operating Expenses - So long as the expense was ordinary and necessary it typically is deductable. This might include: advertising, auto and travel, cleaning, maintenance, commissions, insurance, professional fees, management fees, and mortgage interest. Keep receipts!
Trust me, aside the massive self-inflicted national debt, Uncle Sam has plenty of money and he doesn't need any handouts. When you are managing your own properties, or managing for someone else, please keep all that you should and don't let Uncle Sam take anything more than they are due. Every state has different rules, and tax law changes all the time. Do consult with a tax professional to make sure these deductions apply to you.
Keeping track of all this is usually the problem most landlords face. If you have a property management company handle your affairs, they probably provide you a report at then end of the year with most common deductions itemized. It's still up to you to keep track of all improvements and depreciable items. If you manage your own property, use a property management software package which has deducation and depreciation tracking support.
--- about the author ---
Nathan is a member of Rentec Direct who provides property management software, tenant ach payment processing, and Rentec credit reports.
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