Tax Benefits of Rental Property

by Renee Greene ; Updated July 27, 2017

Overlooking the tax benefits on rental property can cause a landlord who had hoped to make a profitable return on investment (ROI) end up losing money on the bet. IRS regulations maintain that a property owner should be able to show written receipts for income and expenses on rental property as with any aspect of any other business endeavor.

Information for the IRS

The IRS wants to know if you own a second house that you rent out all the time and if you own a vacation home that you rent out when you or your family isn't using it. If so, all rental income, generally speaking, must be reported on your tax return.

Turning White Paper to Green

The paper trail is important to maximizing the tax advantages of owning rental property. It should include a statement showing what you paid for the property, and how much interest you are paying if it is a financed purchase.

Other Considerations

It will also call for a statement of depreciation, any security deposits and rent payments accepted and all costs and expenses associated with upkeep and maintenance including repairs and mileage and gas used for transportation to and from the property.

Interest and Taxes

Of the items listed above, the most important is keeping track of interest paid on financing. Interest and taxes are the biggest expenses, followed closely by hazard insurance premiums, if you have it.

Conclusion

A little financial savvy can go a long way, especially if you're prone to good record-keeping. IRS Publication 527 looks at the rental for-profit activity in which there is no personal use of the property, depreciation as it applies to your rental real estate activity, the reporting of your rental income and deductions, special rental situations, and the rules for rental income and expenses when there is personal use of the dwelling, such as in the case of a vacation home.

About the Author

Renee Greene has been writing professionally since 1984 when she began as a news clerk for "The Columbus (Ga.) Ledger-Enquirer." She has written nonfiction books and a book of Haikus. She holds an associate degree from Phillips Junior College and is an English major at Mesa (Ariz.) Community College.