Steve Welty

Issue# 39

March 2025

Happy Saturday, Housing Heroes!

Heads up, if you’ve been putting off your tax planning and ignoring your rental property expenses, it’s time to tune in. With Tax Day looming on April 15, 2025, there’s no better moment to review every deductible expense that can help you reduce your year-end tax liability. This comprehensive guide, inspired by best practices in our industry, dives deep into the myriad of write-offs from mortgage interest to vacancy losses that can significantly boost your bottom line. However, accurate record-keeping is essential to ensure you capture every eligible expense and avoid overspending.

Even though landlording is generally considered passive income, expenses like property management fees, legal fees, and maintenance costs add up and the IRS lets you write off nearly every one of them. Here’s a breakdown of everything you can write off, along with strategies to keep your records in order:

What Can You Write Off?

Accounting & Bookkeeping: Deduct fees for professional services that help you manage your financial records.
Advertising & Marketing Costs: Write off expenses for promoting your rental property through online listings, signage, and other marketing efforts.
Business Entity Pass-through Deduction: Benefit from deductions applicable to certain business structures.
Capital Improvement Depreciation: Depreciate costs for permanent structural upgrades or restorations over time.
Cell Phone & Internet Services: Deduct costs associated with managing your rental operations.
Closing Costs: Write off expenses incurred during the acquisition or refinancing of your property.
Credit Card Debt: Interest on credit card debt tied directly to rental property expenses is deductible.
Depreciation of the Building: Deduct the annual depreciation of the building’s structure (excluding land).
Depreciation of Property Classes: Depreciate items like appliances, carpeting, and furniture over their useful lives.
Education: Claim costs for seminars, courses, or subscriptions that enhance your property management skills.
HOA Fees: Deduct Homeowners Association fees related to your rental properties.
Home Office: Write off expenses for a designated space used exclusively for managing your rentals.
Independent Contractors and Consultants: Deduct fees paid to experts for rental-related services.
Mold Remediation: Write off expenses for removing and remediating mold issues.
Mortgage Interest: Deduct the interest paid on your rental property mortgage.
Mortgage Insurance Premium: Premiums for mortgage insurance are also deductible.
Landscaping and Lawn Care: Deduct expenses for maintaining your property’s outdoor areas.
Landlord Insurance: Write off insurance premiums covering rental property risks.
Leasing: Deduct costs for leasing agents and advertising to attract tenants.
Legal Fees: Write off fees for legal services related to property management or eviction proceedings.
License and Registration Fees: Deduct fees for necessary licenses and registrations, such as LLC fees.
Maintenance: Routine repairs and upkeep that maintain your property’s condition are deductible.
Office Supplies: Deduct costs for supplies used in managing your rental business.
Pest Control and Extermination Services: Write off expenses to manage pest issues.

Additional Considerations for Housing Providers

Can You Deduct Your Own Labor?

The IRS prohibits the deduction of personal labor as a business expense—you can’t pay yourself with after-tax dollars. However, expenses for repairs, insurance, and maintenance paid to external contractors are eligible for rental property tax deductions.

Can I Deduct Remodeling Expenses?

Typically, expenses for repairing a rental property are deducted like any other business cost. But if an expense enhances the property, restores it, or adapts it to a new purpose, it’s considered a capital improvement and should be depreciated. For instance, fixing a small section of a roof is treated as a repair, but replacing an entire roof is a capital improvement that must be depreciated over time.

Rental Property Deductions Bookkeeping

When claiming rental property deductions, it’s critical to separate personal expenses from rental expenses. If your property is used for personal purposes, like a vacation home, only a portion of the costs may be deductible. Keeping detailed records, receipts, and invoices is essential. In the event of an IRS audit, having proper documentation will prove the legitimacy of your deductions.

Please remember, we’re not tax professionals, always consult with a qualified accountant or tax advisor to ensure you’re up-to-date with the latest tax laws and making the best decisions for your rental property.

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