What Can You Write off on a Rental Property?

by Amanda Erickson
Keep track of the cost of repairs throughout the year so that you can claim a tax deduction.

Renting out a home can be a great source of income, and becoming a landlord typically benefits you on your taxes. Several deductions are available for certain costs, including mortgage interest, home repairs, and the fees you pay associated with drafting a lease agreement. However, in many places, you must rent out your home to one person for more than a week, otherwise the IRS considers it a business, not a rental property.

Mortgage and Taxes

As with any home, you can write off the mortgage interest you pay, along with your property tax. You can also write off some fees associated with getting a mortgage, like commissions, capital expenses, and recording fees. However, you must tally these fees and then deduct them over the entire life of the loan. So, if these fees came to $10,000 and you had a 20-year loan, you could deduct $500 a year.

Repairs

While you cannot write off improvements, the IRS allows landlords to write off home repairs. So, for example, you cannot write off installing window boxes or radiant heat in the floors of your home. However, you can write off fixes to a leaky roof, broken window, or drafty door.

Operating Expenses

You can write off the water bill, electricity and heating fees, home insurance, homeowners association dues and any other fees you pay for the home. However, you can only write these fees off if you pay them yourself. If, for example, your tenant pays the electric bill, you cannot then write that off.

Ownership Expenses

You can also write off any payments you make to rent and run the home. For example, if you pay a property manager to help maintain the rental, you can write off those payments. If you pay for advertisements in newspapers or on websites, those can also be written off. You can even deduct the miles you drive to the property from your home. In 2013, the standard mileage rate was 56.5 cents per mile, according to the IRS. You can also deduct tolls and parking.

Depreciation

Each year, you can deduct a portion of your property value by depreciation. You will need to divide the value of the property over 27.5 years. So, for example, if you paid $100,000 for the home, you can deduct $3,636 a year. You can also depreciate investments and improvements you've made to your rental property. These include room additions, new carpeting, and swimming pools.

About the Author

Amanda Erickson has been writing professionally since 2008. She has written for the "New York Times," "Christian Science Monitor" and "Chronicle of Higher Education." Before moving to New York, she worked as a political blogger at the "Washington Post." Erickson holds a Bachelor of Arts in urban history from Columbia University.

Photo Credits

  • Jupiterimages/Photos.com/Getty Images