Legal Matters & TaxesReal Estate CareersWhat Rental Property Tax Deductions Apply to You? by Hamza Abdul-Samad May 27, 2018January 27, 2019 by Hamza Abdul-Samad May 27, 2018January 27, 2019Earning rental income isn’t the only way to make a profit when investing in real estate. There are two other main ways of benefiting from investment properties. Appreciation, or the increase in the value of an investment property over time, is another valuable form of profit earned in real estate. The third form of earning a profit is through tax benefits, especially in the form of rental property tax deductions.But Before We Mention the Most Common Investment Property Tax Deductions…There are a few things to note before we list the top rental property tax deductions. For starters, we need to be clear on what rental property tax deductions actually are. Investment property tax deductions are deductions on expenses and costs associated with rental properties (to learn more about these costs, read this: “The 6 Hidden Costs of Owning Rental Property”!). They typically include rental expenses and operating expenses but can include fees unrelated to both. In order to properly claim rental property tax deductions, the IRS requires that real estate investors file for rental income tax and keep records of the various expenses to be claimed as deductible.Here are two great tips for real estate investors to stay organized with rental expenses. One: Reserve a separate checking account for them. Two: Use Mashvisor’s rental property calculator to keep track of your expenses (read this to learn more: “Investment Property Calculator for Analyzing Real Estate Investments”!). Remember, you must have convincing documentation in order to deduct rental expenses!Top 13 Rental Property Tax DeductionsUtility CostsUtility costs are one of the most common investment property expenses deducted by real estate investors. These costs cover a wide range of expenses and bills, such as heating, electricity, internet, water, and so on. Keeping track of income property utility costs is pretty straightforward. All you need to do is save the bills you receive for the various services.Property Insurance and Homeowner Association FeesProperty insurance and all types of insurance, as a matter of fact, are tax deductible. The most common types of investment property insurance are liability insurance, hazard and fire insurance, and special perils insurance against natural disasters.HOA fees are also income property tax deductible. These are fees paid to homeowner associations, such as condo associations.Property TaxEven paying property tax comes with tax benefits. Property tax differs from one location to the next, as well as the extent to which it is deductible. Be sure to contact a tax advisor in your area to better understand the property tax benefits available to your income property and location.Mortgage Insurance and InterestAs previously mentioned, all types of insurance can be eligible for rental property tax deductions. The same can be said for one of the most detested costs of owning rental properties: mortgage insurance. Just as all types of insurance are tax deductible, all types of interest paid to lenders are tax deductible. This means that the most common form of interest for any real estate business, mortgage interest, is also tax deductible.Property Management FeesProperty management is an absolute cost for any real estate career. Whether you opt for self-management or professional property management, fees are bound to pile up. Luckily, property management fees are tax deductible for both forms of management.Professional Fees and Licensing FeesOperating a real estate business requires the help of legal, accounting, and other professional advisors. A real estate business will also require some type of license, at the very least. The costs and fees associated with licensing and the help from professionals can be tax deductible, provided that the required documentation is present.Advertising and Marketing FeesRental property tax deductions are also applicable to the costs related to advertising and marketing the investment property. As always, the expenses must be properly documented if a real estate investor wishes to have them deducted.Tenant Screening If you want to rent out to the best tenants out there, you need to screen your tenants. This requires criminal background checks, credit reports, and other forms of information. The costs used to obtain the reports and checks can qualify as rental property tax deductions.Travel ExpensesEven expenses used for traveling purposes related to your investment property can be tax deductible! A good example of this is having a traditional or Airbnb property out of state (to learn more about traditional properties versus Airbnb rentals, read this: “Real Estate Investing: Traditional vs. Airbnb Investments”!). Of course, the travels must be explicitly related to the property, requiring clear documentation.Depreciation This is another form of tax benefits real estate investors should be aware of. Depreciation is essentially a long-term deduction of the price of a property over many years. It is based on the depreciation, or breaking down, of the property.Repair and Maintenance CostsEvery real estate career will be filled with costs used to repair and maintain a property. Luckily, these costs are deductible. As long as the costs do not simply improve the property aesthetically, they remain deductible. To learn about the differences between repairing and improving in regards to tax deductions, check out the IRS’s tips on tax deductions.Closing CostsClosing costs of a purchase can be expensive. But since they fall under rental property tax deductions, their impact shouldn’t be as great. Be sure to document what you need in order to qualify for this deduction.Home Office Expenses Making money in real estate will require a lot of documentation and other expenses related to office work. These expenses, like all the others on this list, are also tax deductible.Final Word on Investment Property Tax DeductionsIs real estate a good investment? With the benefits of cash flow, appreciation, and rental property tax deductions, the answer is a clear yes. Tax deductions can save a lot of money for any real estate business, as long as the expenses are recorded. To start looking for a property to begin your real estate career, click here! Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL 0FacebookTwitterGoogle +PinterestLinkedin Hamza Abdul-SamadHamza is a long-time writer at Mashvisor. With a focus on real estate investing tips, concepts, and top investing locations, he aims to help all aspiring investors who come across his blogs to hit the bank with their investment property. Previous Post Commercial Real Estate Investing: Better or Worse than Residential Real Estate Investing? 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