Rental Property Tax Deductions

Rental property investment is one of the most popular investment options in recent times. As it is, it has been able to generate a lot of attention in the current scenario. However, it needs to be mentioned here, that all your rental revenues are taxable, under provisions of the IRS. However, you can avail a number of tax deductions, which can be availed by you, to reduce your tax burden.

The Internal Revenue Service, or the IRS, offers a number of tax benefits to holders of rental property. As a holder of rental property, you can avail these tax deductions and save a lot of money in the long run. The following are a few of the deductions, which are available to a rental property holder:

1. Depreciation on property
You are entitled to make provision for deduction on your rental property.  This amount of depreciation is allowed as deduction, for the calculation of tax. However, depreciation covers only the value of construction and not that of the value of land.

2. Mortgage interest deductions
As a rental property holder, you are entitled to a deduction on the amount, which you have paid as interest for the mortgage on the rental property. However, you can not get a deduction on the amount paid as part of the principle amount.

3. Deduction on Insurance premium paid
Deduction is also allowed on the amount of premium paid for the insurance of the property. However, it only covers the premium paid in the relevant financial year. Therefore, any advance payment, would not be eligible for deduction.

4. Deduction on Repair works
As per IRS guidelines, a holder of a rental property is entitled to tax deduction on the value of repair works, which have been carried out on the rental property. As it is, your rental property would need regular repairs, as it is not just an asset for you, but also a source of earning for you as well. This amount that you would spend on the repair of your property can also form a basis for tax deduction.

5. Deductions on legal expenses
You are also entitled for deduction on the amount paid by you in the form of legal expenses on the rental property. So, the fees that you have paid to your real estate attorney, is also eligible for deduction, provided, such expenses have been carried out in the relevant financial year.

6. Deductions on other professional services
You are also entitled for deduction on amounts, which you have paid for other professional services, such as payments to accountants, realtors etc. However, such payments should have been paid in regard to the rental property and not for any other purpose.

As it is, apart from the above, other deductions, like that of transport and communication expenses incurred on the rental property, or for the purpose of collecting revenue, are also eligible for tax deductions. These deductions help a lot in lowering the tax burden from your shoulders.