Yesterday, I explained how you can pay almost zero taxes on your rental income.  I highlighted the four main tax deductions landlords and real estate investors often claim: mortgage interest, property taxes, depreciation, and repairs. 

However, sometimes those four deductions aren’t enough, and you might have to pay some taxes on your rental income.  

But what if you can’t stand taxes?  As an employee, you had no choice: you had to give Uncle Sam a cut of your paycheck.  But now you’re a real estate investor.  This is your business, and you know that, with a business, you can do some creative things to lower your tax burden.  And, here, you’re determined not to pay taxes.  Are there, perhaps, other deductions you can claim? 

You bet!!  There are many other deductions you can claim that will probably help you wipe out your tax burden altogether and even claim a loss on the property.  In either one of these cases, you would pay zero taxes.

Every Landlord’s Tax Deduction Guide

You can find these other deductions in Stephen Fishman’s Every Landlord’s Tax Deduction Guide, which is one of the best books on the market on this subject.  Fishman is an attorney and obviously understands how these deductions work. 

In addition to mortgage interest, property taxes, depreciation, and repairs and maintenance, Fishman identifies the following 8 additional tax deductions you can claim for a rental property:

1) Insurance.  The premiums you pay for the insurance on your property are tax-deductible.  This deduction covers all types of insurance, including fire, theft, flood and landlord liability insurance.  Heck, if you employ anyone full-time (like a property manager) and provide health insurance and workers’ compensation insurance, you can even deduct the cost for that, too!

2) Losses.  You can deduct any losses your property suffers from a casualty or theft.  For example, if a fire, flood, or hurricane damages or destroys your property, you can claim a deduction for all or part of the loss.  (You can’t deduct the entire cost of the property that is damaged or destroyed.)  However, I believe the losses need to be covered by insurance. 

3) Interest.  In addition to the mortgage interest deduction, you can deduct interest on credit cards for goods or services you purchase for the rental property.  Not a bad deal.

4) Home Office.  If you handle and oversee your rental properties from home, you can deduct the expenses associated with the room or space in your home that you use as a “home office.”  You can do this whether you own your home or rent. 

5) Employees.  You can deduct the wages you pay (as a business expense) to anyone you hire to perform services for your property.  Employees covered by this deduction include property managers and independent contractors (such as handymen or repairmen, landscapers, engineers, plumbers, etc.).

6) Local Travel.  If you drive anywhere, and that trip is related to your rental property, you can deduct the expenses of that trip.  For instance, if you drive to one of your apartments to meet with a property manager or a tenant, or if you drive to your lawyer’s office to meet with him or her about the property, you can deduct the travel expenses related to that trip. 

You can either (a) deduct the actual expenses (gasoline, maintenance of vehicle, repairs) or (b) deduct a value calculated from the standard mileage rate (approximately 50 cents per mile).  Thus, if you travel 15 miles: $0.50 x. 15 miles = $7.50.  Obviously, you should choose the number that is greater (total of gasoline, repairs, etc. or the mileage number) in order to claim a bigger deduction. 

7) Long Distance Travel.  This deduction includes overnight travel that is related to your rental property.  Airfare, hotel, meals, rental cars and any other related expenses qualify for this deduction.  For example, if you live in New England and travel to Miami to meet with a tenant who lives in a property you own in Miami, you can deduct almost all of the expenses associated with that trip.  Of course, you should keep records of these trips and related expenses to back up the deductions you claim.

8) Professional Services.  These are fees that you pay attorneys, accountants, property management companies, advisers, and any other professionals that assist you with your rental property.  Remember that these services must be related to your rental property.  These fees are classified as operating expenses.

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