Owning rental property can be an amazing ride—passive income, long-term wealth, and all those “landlord life” vibes. But let’s face it, taxes are the not-so-glamorous part of being a landlord. Don’t worry! We’ve got you covered with this easy, breezy guide to rocking rental property taxes like a pro.
Cha-Ching! Expenses You Can Deduct
Who doesn’t love a good tax deduction? Being a landlord comes with tons of opportunities to save. Here are the MVPs of deductible expenses:
- Mortgage Interest: It’s like the ultimate landlord tax perk.
- Property Taxes: Yeah, taxes on taxes—it’s a thing, but you can deduct them.
- Repairs & Maintenance: Fixing that leaky faucet? Deduct it! Painting the living room? Deduct it!
- Insurance: Landlord insurance, property insurance—write it off!
- Utilities: If you cover water, gas, or electricity for your tenants, that’s deductible too.
- Professional Fees: Hiring a property manager? Paying for legal or accounting services? Yep, deduct those, too.
🛠 Pro Tip: Renovations are different from repairs! Renovations add value to your property and must be depreciated over time. Repairs? Deduct those in the same year you pay for them.
Passive Activity Rules: What’s the Deal?
Ah, the IRS and their rules… Let’s make this simple:
- Passive Income: Your rental property income is “passive,” meaning it’s not like your regular 9-to-5 paycheck.
- Passive Losses: If you spend more on your property than you make (hello, big repairs!), you may not be able to write off the loss unless:
- You actively manage the property (think landlord hustle), AND your income is below $100K. (Sorry, high rollers—the deduction fades out completely at $150K.)
- You’re a real estate pro (spend 750+ hours a year on real estate activities).
Don’t qualify? Don’t worry. Unused losses don’t vanish—they roll forward to future years.
High-Income Hacks: What If You Make Too Much?
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