As a landlord, you have to paint, and clean, and advertise — all to find tenants. And then once you have a tenant living in your rental home, you have to mow the yard, and fix leaky faucets. Renting out a home, in northern Virginia or anywhere, comes with a lot of responsibility, but you knew that going in, and it’s those rent checks and the tax deductions that make all the work worth it.
Did you say tax deductions?
Oh yes, I did. Consult the Internal Revenue Service (IRS) for full details regarding using many rental property expenses to offset your rental income, or read on.
Write off your rental home expenses.
A great many of your rental home expenses are tax deductible. Bet you didn’t know that, huh? Save receipts; keep proper records, and figure an average of four hours per week spent to maintain your rental property. If you dot all your Is and cross all your Ts, you can claim deductions (on Schedule E) for each year during which you pay for common rental property expenses:
- Advertising
- Cleaning and maintenance
- Commissions paid to rental agents
- Homeowner association/condo dues
- Insurance premiums
- Legal fees
- Mortgage interest
- Taxes
- Utilities
Less common, but equally applicable deductions include expenses related to obtaining a mortgage loan, and any fees charged by the accountant you hire to prepare your Schedule E.
What about travel expenses?
Yes! You can deduct expenses incurred when traveling to a rental home for the purposes of showing it to prospective tenants, collecting rent, or performing maintenance. Drive your own car? Claim the standard mileage rate (That’s 56 cents per mile for 2014.), plus any tolls and parking fees paid.
But there are limits. If you must travel a distance to visit your rental home, and decide to mix a little pleasure with your business along the way, only expenses specifically related to “manag[ing], conserv[ing], or maintain[ing]” the property can be written off.
Why should I write off my rental home expenses?
They don’t call it income property for no reason; the rent your tenants pay to live in the home you own, but rent out counts as supplementary income. By deducting your rental home expenses, you offset the level of income that can be taxed by the IRS. Let’s break it down.
Say you collected $24,000 in rent for your townhouse in Fairfax, Virginia last year, and spent $10,000 of that on homeowners’ association dues, and insurance, and to replace the water heater, and gosh, don’t forget about Fairfax County property taxes. When you choose to deduct those expenses, your taxable rental income becomes $14,000 — not $24,000. And that’s one great big difference.