What Can You Deduct as a Landlord Off Your Taxes?
Since rental property is considered a business, you can deduct expenses that you normally would not be able to deduct for what is solely your primary residence from your federal taxes using Schedule E. If you live in a unit in your rental property, and rent even one other unit, you can still deduct the allowable expenses; however, mortgage interest and property tax deductions must be taken as a percentage based on the portion that is rented.
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Incidental Expenses
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If you have to advertise to rent your apartment, you can deduct those expenses. You can deduct legal expenses; for example, if you must hire an attorney to evict a tenant. Upkeep and maintenance of your property are also deductible. You can deduct cleaning supplies; snow removal supplies, such as salt and shovels; landscaping materials such as sod, flowers and fertilizer; and repairs, such as broken windows or locks on doors. Tax preparation expenses and insurance premiums are deductible, as are local transportation expenses, if you are engaged in the building's business.
Ownership Expenses
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When you purchase your rental property, you can write off the points, your mortgage commissions, abstracts, recording fees and lawyer's fees. The mortgage expenses must be amortized over the life of your mortgage. You can deduct the expense to manage an unrented property, and you can deduct your mortgage interest as both are business expenses. You can also depreciate the value of your property. Utilities, for which you as the landlord are responsible, are considered valid expenses.
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Depreciation Expenses
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If you must replace a furnace, hot water heater or other large appliance, you can deduct it, but it must be depreciated, the cost cannot be deducted outright. Appliances have a specific depreciation value set by the IRS. Appliances such as washing machines, dryers, dishwashers, refrigerators and stoves are also deductible. If you purchase a snowblower or riding lawn mower, those, too, must be depreciated, but are allowable expenses.
Miscellaneous Information
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While repairs are outright deductible expenses, improvements that increase the property value must be depreciated. This would include adding a deck, remodeling the kitchen or bathroom or adding an addition. If you own the property with someone else you can only write off the percentage of the expenses that corresponds with your percent ownership. If you own 50 percent, you can write off half of the expenses. If you live in the property, you must calculate the percentage of the property that is rental, and that is the percentage of expenses you can deduct. If you have four units and live in one, you can deduct 75 percent of your expenses. If your rental unit remains unrented, you may be able to deduct the loss of the rent as a business expense.
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