Investment Property Tax Deductions: Screening, Taxes, Legal Forms

In parts one and two of this multi-part blog series, we’ve gone over several of the numerous tax deductions and benefits that come with ownership of an investment property. Whether for a rental property, forms of passive real estate investment or any other type you’re involved with, there are over 20 different forms of tax deduction you might be eligible for, and taking advantage of them often makes the difference between a good and bad investment.

At Fox Financial, we’re happy to assist real estate investors with a variety of options, from passive real estate investing to commercial real estate and several areas in between. We’ve advised numerous clients on the potential tax benefits afforded them by their investments, including those many have been missing for years. What are a few of the other tax incentives you should be sure to investigate if you’re a real estate investor? Here are several.

Tenant Screening

For those who are invested in rental properties as a form of income, tenant acquisition will be an important part of the puzzle. And those who are doing this diligently, whether on their own or with the assistance of a property manager, will collect a few specific expenses here: Tenant credit reports, background checks, eviction history reports, identity verification, employer and income verification, housing history and several others.

Luckily, every single one of these is tax-deductible at the end of the year. There are even cases where the applicant pays for screening report costs and you still get some tax benefits at years’ end.

Property Taxes

Another area where you’ll benefit as a rental property owner is with property taxes, where you can deduct these if you’re a landlord. For those who are invested in other forms of real estate, however, this might be a bit more complex due to some changes made last year.

Investors are only allowed to cap state and local taxes up to $10,000, stricter requirements than before 2020. These include not only property taxes, but also income tax, sales tax and others. However, there are still sizable benefits here to many investors.

Legal Forms

These are mostly for landlords and rental property owners, but may also apply to other investors in a few cases. Legal documents like lease agreements, property management contracts, eviction notices, tenant letters and others will all be tax-deductible for landlords, as will the up-front cost of these legal forms. These forms tend to be state-specific, so just be sure you’ve purchased the correct ones for your needs.

For more on the various tax deductions that real estate investors are eligible for, or to learn about any of our real estate investment services, speak to the staff at Fox Financial today.