Some New York residents find that owning rental property is rewarding. Although the role of the landlord carries much responsibility, there are also certain benefits. Among them are these federal income tax breaks.
Operating expenses
In a landlord/tenant situation, landlords can save taxes on operating expenses related to maintaining and managing their rental property. You can deduct things such as property taxes, leasing commissions, landlord liability insurance, utilities you pay, supplies, landscaping, property management fees and advertising costs. The IRS acknowledges these are necessary expenses and allows you to save the money spent on them on your taxes.
Mortgage interest
Another nice tax deduction you can receive as a landlord is from mortgage interest paid on a loan you obtain to buy a rental property. However, this is only available on loans of up to $1 million. You’re also able to deduct from the money you borrow from home equity loans.
Depreciation
As a landlord, you can deduct depreciation expenses from your taxes. The IRS allows this over 27.5 years as property suffers wear and tear. When your rental property needs home improvement to continue being livable, those expenses are tax deductible.
Owner expenses
You can also deduct any expenses related to your job as a landlord from your taxes. This includes traveling to a property if you have to meet with tenants, continuing your education or even building your own home office for business purposes. Any other expenses directly related to the business are tax deductible and can help you save money each year.
FICA taxes
Landlords get the benefit of saving money on their taxes by avoiding FICA taxes. Typically, FICA goes toward Social Security and Medicare; as a landlord, the money you make is considered earned income, so you aren’t required to pay toward it.
As a landlord, you are entitled to these tax breaks. You can put the money you save to good use to benefit your property and tenants.