Hi everyone. I’m Michael McVety and today I'm talking about 10 tax deductions that every landlord should know about. Whenever you're looking at buying a real estate investment property, these are things that really you should know about. I know that a lot of real estate people have a tendency to focus on how much rent you might get on a seasonal or an annual rental, but honestly these deductions are really, really important factors. They are one of the many things that lead to better cash flow for your rental property. I am not a tax accountant but I do understand real estate deductions. I also help a lot of real estate investors buy residential properties.
I'm Michael McVety and I'm president of Red Fortress Property Management. A couple of things about me. I'm a master property manager. It's a designation given through the National Association of Residential Property Managers. There are about 200 total in the nation. Red Fortress Property Management is a nationally Certified Residential Management Company (CRMC) and there's only 43 right now in the entire United States. We manage rental properties for about 150 clients. I've been a landlord and property manager for 25 years, and among other things, I used to be former state president for Florida Property Manager.
So let's talk about 10 useful tax deductions real quickly every landlord should know about. First of all, one of the things that you need to know about is that this is coming from Publication 5 27 by the Internal Revenue Service. So you can look this up and there's actually more than 10 actual tax deductions, but I said “useful” because some of them might not be as applicable to you. For instance, you can write local transportation expenses off or utilities. Those are all valid points. Maybe if you take a bus to get there or you're paying utilities because you have a short term rental. That's great. But again, it's the top 10 deductions.
Mortgage interest. So remember it's not loan principle but mortgage interest. So if you have a mortgage on the property, and if you're getting a 30 year loan, most of the payments that you have for the mortgage can be written off because it's interest and principle.
Property depreciation. This is huge. So if you buy something, as an example, for 200,000 and you're turning it into a rental property, you get to write off 3% a year. That's $6,000 that you would mark down from your income tax. So if you made, for instance, $50,000 a year, that alone would mean that you wouldn't get taxed on 50,000. You would get a $6,000 a write-off and so you would be taxed only on $44,000 of your income as an example.
Repairs and maintenance. So when you have situations like roof repairs, dishwashers, landscaping, all these repairs and maintenance are able to be rid off against the income of the property.
Insurance premiums which are massive since flood insurance in Southwest Florida has really skyrocketed. Obviously we've had several hurricanes recently in our area, unfortunately, and so the insurance premiums are getting more expensive, whether it's for floods, roofs or fences that sort of thing for hurricanes, all of that could be written off.
Property management fees, leasing fees and other commissions. So if you were to hire someone like ourselves, a professional property manager, to take care and manage your property, all of our fees, our management fees, leasing fees, whatever commission there is, you get to also write that off on your taxes.
Legal and professional fees. So if you have somebody like a tax accountant prepare your taxes and things like your Schedule E, which deals with your rental properties, all of those fees are able to be written off because you need those services with regards to managing your rental property.
Advertising costs. So if you're a landlord and you make a sign or a specialty sign for an association that requires something specific or a certain type of sign, or if you're advertising on the internet such as you're putting your ads on three websites, all that is tax deductible because it's operating a rental property.
Property taxes. This is another large deduction where our real estate gets more expensive. That doesn't just necessarily mean that your value of your home is going up. Sometimes they change the millage rate. So as your property goes down in value but the millage rate goes up- as it did in 2006 through 2007- you will be paying the same amount of property taxes. So your property taxes are also tax deductible.
Furnishings! If you decide to do a short-term rental and you want to furnish it, because most of the short-term rentals are, this is another tax deduction. You normally want to do it all in the same year. So if you buy all the furniture in 2024, that's the year that you would normally write it off in.
Association dues. If you're in a homeowner's association or a condo association and you pay quarterly or monthly dues, those are obviously expenses. If you get a special assessment that's also a tax deduction against your taxes!
So those are the 10 most useful tax deductions that you get as a landlord and you should really use them. A lot of people don't think of all of these and it will hurt your cash flow. These tax deductions help make you more money, both in cash flow, that's income minus your expenses by increasing your expenses. And it's also gonna save you money such as lowering your income tax that you file annually by depreciation. Sometimes, your expenses are higher than your income and you can write that off your personal income taxes and you would be paying less taxes. If you have any questions or thoughts on this or even another topic, feel free to email me at mike@redfortresspm.com. I hope you have a great day and I hope this was useful for you.
