Tax Deductible Rental Property Expenses, Part 1
Interest
If you’re renting a room in your home, or if it is a duplex and you’re occupying the other unit, you will need to pro rate the mortgage expense. (See the article titled Personal Use of Rental Property, included in this guide, for more on how to calculate personal use). Now if you are renting the property as its own living unit, you can deduct all of the mortgage interest you paid on Schedule E. Also, if you own only a part interest in the rental, you must multiply the total amount of mortgage interest paid on the property by your ownership interest. Be aware, however, that certain expenses you pay to obtain a mortgage (such as title/recording fees and commissions) are capitalized as part of your depreciable basis for the property, and are not expensed. See the article titled Depreciation Expenses for Rental Property, included in this Guide, for more on depreciation expense. Other types of interest may also be deductible, if you incurred the interest solely for the benefit of the rental property.
Advertising
Promoting your rental property on the open market, through marketing efforts such as posting newspaper ads or paying for internet marketing, is a tax deductible expense.
Professional fees
You can deduct professional fees incurred in connection with the rental. For example, if you paid an attorney to create a rental agreement, or to initiate court proceedings to evict a tenant, you may deduct these fees. Furthermore, one can deduct expenses paid to a tax accountant/CPA for preparing the Schedule E of your tax return from the previous year. Be sure to pro rate the total fee between the Schedule E and the rest of the tax return based upon the percentage of time the respective sections of the return took. Any fees for preparation of any section of the return separate from Schedule E must go on Schedule A as personal tax prep expense. And, in the event that you pay any management fees or commissions to a realtor group for overseeing your rental, you may deduct these expenditures as well.
Tax CPA +John Huddleston has written extensively on accounting and other tax related matters of interest to small business owners. He is a graduate of Washington State University and the university of Washington School of Law.
About Portland CPA
Portland CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. Since 2002, he has owned Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.
