As any longtime investor in virtually any field will be aware, taxes are some of the most important related themes to consider for any investment. This is particularly true for those who are entering the real estate investment or landlord world – in fact, many real estate investors don’t quite grasp the scale and degree to which various tax deductions or incentives might be available to them.
At Fox Financial, we’re here to help. We offer numerous services to assist with real estate investing for beginners, intermediate investors and even longtime accredited investors, with solutions ranging from passive real estate investing to investment properties and many others – including assistance with all the tax deductions and other benefits potentially available to you in this realm. There are so many such deductions for a rental property that we’ll be splitting them into a multi-part blog series and doing a quick primer on each, but be sure to ask our staff for a further explanation on any area you’re unsure about here.
Theft or Casualty Losses
While personal casualty and theft losses have been suspended from tax deductions through the year 2025, this does not impact landlords. For rental properties, landlords can still deduct losses from theft or rental damage as business expenses.
Another area that’s only applicable to rental properties, and not primary residences, is tax deductions for simple repairs and maintenance. When these are low-cost items, you simply list them on your tax deductions as you would for any other.
When they’re for larger improvements or even replacements, such as a new roof, this may count as a “capital improvement.” In this case, you’ll have to spread the deduction over multiple years in the form of depreciation.
If you pay your gas, heating, trash, sewer and other utility costs for the rental, these costs can all be deducted on your return. However, if the tenant reimburses you for these, you will have to declare both this income and the expense, even though they offset.
Forms of Depreciation
There are a couple forms of property depreciation that may bring you deductions. One is general depreciation, which may cross over with capital improvements in some cases; another is segmented depreciation, which is a paperwork-heavy area our pros will inform you of if it applies to you.
Real Estate-Related Travel
If you have traveled specifically for real estate investing purposes and can prove this, you can deduct travel costs from taxes as well. This requires strong documentation, however, so don’t try to fake it.
Home Office Deduction
Another deduction that’s possible, but that requires great care, is for a home office. It requires that you set aside some of your own home only for business or real estate investment purposes – if done correctly, you can deduct that percentage of your housing bill. However, the IRS is looking closely at this deduction, specifically with increases in work-from-home situations over the last year, and this one could be changing.
For more on tax deductions available to real estate investors, or to learn about any of our property investment services, speak to the staff at Fox Financial today.