Remember Potential Tax Breaks When You Own Rental Properties

As you move into 2014 as a rental property owner, keep in mind which tax deductions you might likely benefit from. You may be surprised by the tax breaks you qualify for.

Read on for some of the possibilities and check with your accountant for even more.

Just be sure to keep careful records throughout the year so you can back your deductions with the receipts to prove them.

Expenses
There are a number of expenses related to operating and maintaining your property that you can deduct from your taxes.

• Repairs, which help keep the value of the property from depreciating, are deductible in the year during which they were made. Examples of such repairs include fixing or replacing items that are broken, such as a light switch, roof, toilet, window glass or flooring. Painting is also a deductible repair.
• Travel, both local and long distance (depending how close you live to your rental properties) also offers a tax break. For car travel, you can either deduct the actual cost of repair, gas and maintenance or do a per-mile reduction. Check with your accountant to get the latest cents-per-mile rate. For long distance travel, you can deduct airfare, hotel, meals and other related expenses.
• Salaries for employees are deductible, as is money paid toward contractors. Professional service fees are also deductible, including lawyers, accountants, consultants and property management companies, as long as their work is directly on behalf of your property.
• Insurance premiums are deductible, including insurance for fire, flood, theft and liability. If you have employees, the cost of their workers’ compensation and health insurance is also deductible.

Loss

Both loss from theft and any loss you experience as a result of property damage from an unexpected event like a flood or fire and can be at least partially deductible, depending on your insurance coverage.

Interest

You may not know it, but interest is one of a landlord’s largest deductible expenses. Interest on credit cards used for rental goods and services and mortgage interest payments on loans used to purchase or improve a property are deductible.

Before you sit down to do your taxes as a rental property owner, make a complete inventory of all activity you put toward your rental business. If you pay money towards it, there is likely a way you can deduct it from your taxes.  Be sure to check with your accountant on the correct, legal way to apply deductions to your tax return.