Tax Deductions for Landlords 2020

March 18, 2020

Landlord Tax Tips for Tax Year 2019

Another year has passed and you’ll be filing your taxes for the year of 2019. When you consider the current state of the economy and what might transpire for you in terms of cash flow, added work, and possible evictions, it’s wise to get your maximum tax deductions now.

Although most landlords may believe their tax software will automatically account for all the correct deductions, it actually isn’t so. You need to be mindful of what you’re claiming to ensure it is actually on your tax return and accurate.

Your data from property management software will help keep you accurate and organized, but you still need to go over each item in your tax return.

For new landlords, it’s important to be sure of what you’re claiming and reporting. For you it’s a learning experience and one that can pay off well.

Do a test run with your tax return so you see the actual amounts of deductions, how they’re applied and what you will probably owe the IRS. Many business get surprised by the high amounts they owe later because they weren’t familiar with business and rental property taxation.

Reporting Your Taxable Income

The IRS reminds us that all of our rental property income must be reported on a 2019 tax return. And the associated costs can be deducted from your rental income. Lowering your taxes doesn’t take much time. And this year, the IRS may not mind that you’re trying harder to keep your money as long as it done according to the tax rules.

Those who rent out their homes such as in Airbnb rentals must file their rental property income. When you rent your home to a family member, you could lose your ability to claim a tax deduction. You can deduct up to $25,000 in rental property losses each year. And there are limits to what you can claim when you occupy the premises.

Cash Basis or Accrual

There are two ways you can report your taxes: cash basis or the accrual method. They create different tax deduction criteria.

If you file under a cash basis, you report your rental income on your return for the year you receive it, regardless of when it was earned. If you use the accrual method, you would report rental income when you earned it, rather than when you received it. Therefore you could deduct your landlord, investment, and property management expenses when you incurred them, rather than when you paid them.

Remember that advanced rent and security deposits are considered rent income, as are canceled lease fees, locker storage and parking fees. Utilities paid to you by the tenant are included as well. Your property management software subscription is also deductible.

We thought we’d take a look at the top 18 tax deductions for landlords. There are specific rules attached to each deduction and type of incomes, so please refer to a tax expert for legal guidelines.

18 Key Tax Deductions for 2019:

property tax (all state and local government taxes on your properties)
landlord insurance (any costs associated with landlord or property management insurance policies)
building asset depreciation (see the depreciation schedule for buildings)
capital appreciation and improvements (new appliances, flooring, renovations, HVAC etc. written off on depreciation schedule)
interest paid (there are new limits on deducting interest paid)
utilities (electrical, gas, water and sewer bills)
property management staff wages (staff wages and benefits paid)
losses (lost rent, rental unit damage, casualty losses, theft, and other write offs)
home office use (charge the square footage portion of your property or rental costs)
maintenance and repairs (all costs related to cleaning, pest control, trash removal, snowplowing, fixing your units and service contractor fees)
vehicle and fleet costs (all your vehicle maintenance fees, usage fees, etc)
legal and professional costs (licenses, association fees, fees for lawyers, eviction and court processes, and accounting services)
travel and transportation (all your local and convention trips should be included, 100% of airfare, 50% of meals, and you may have a split if you’re taking a vacation during that trip)
cell phone and internet costs (all your business use should be included)
advertising and marketing (all your PPC ads, sponsorships, website fees, content creation, and local advertising)
software subscriptions (yes, your landlord software subscription is tax deductible)
pass-through tax deduction (your rental income must be a business, you must have a pass through business, and have qualified income and taxable income).
renewable energy credits (solar panels, wind turbines, geothermal heat pumps and other renewable energy equipment)

If you rent out your home for a part of the year, and be considered a rental property for tax-loss purposes, your personal use of your home can’t exceed 14 days or 10% of the days it is rented during the year, whichever is greater.

You can save more in your first few years of owning rental property by using cost segregation. Landlords can increase first-year depreciation deductions for rental property by combining cost segregation with the new 100% bonus depreciation.

If you’d like to know more about all of the tax deductions for landlords listed above, get a copy of Nolo’s Every Landlord’s Tax Deduction Guide online. It’s available in PDF, EPUB, MOBI formats for mobile devices and ereaders.

* Please note that these helpful tips are not meant to replace legal tax advice provided by a qualified tax accountant. Tax laws change fast and the above tips may not be valid. Please consult a tax professional familiar with property rental in your state. We hope it will help you think about and plan a sensible tax strategy and avoid tax traps and pitfalls.

Remember that the bookkeeping and accounting features in ManageCasa property management software can make tax time a breeze. Your tax accountant will be grateful for it.

Good luck getting your maximum tax deductions and returns this year.