Tax Deductions for Real Estate Investors

Many expenses for real estate investors are tax deductible.  Many do not know the difference between repairs and improvements, but it is important to know this when it comes to filing your taxes.  Repairs are fixes that keep the home in working condition and can be written off, but improvements, which add value, change a function in the home, or extend the life of the property, cannot.  However, improvements can be deducted over years.

Schedule EThroughout the year, you should save all receipts and other documentation pertaining to the property, and file deductions on Schedule E. You can deduct expenses associated with:

  • obtaining the property mortgage including real estate professional commissions, insurance premiums, and mortgage interest
  • home owner association/ condo dues
  • interest on business credit cards
  • advertising the property
  • cleaning and maintaining the rental
  • legal fees associated with the property
  • state and local taxes, and fees for filing yearly taxes
  • rental property utilities
  • travel expenses associated with the property

The wear and tear of the rental property can be a write-off too.  However, only portions can be deducted over a number of years.  This starts once the property is ready to be rented and should stop when the cost is recovered or you are done renting it, whichever comes first.  This is the trickiest deduction, so it is important to have your CPA or tax expert handle this.

As real estate investors, what other expenses have you written off?