Top 5 Tax Deductions for Landlords in 2013
Owning rental property has several advantages especially when it comes to tax deductions. Almost everything that you purchase to run your business is tax deductible as long as it is ordinary, necessary, and the cost is reasonable for the item or service you are purchasing. (As a friendly reminder since we are almost into February, make sure to mail your 1098’s, 1099’s, and W-2’s by January 31st. )
Below is the Top 5 Tax Deductions for Landlords in 2013
1) Depreciation
This is one of the biggest incentives to purchase rental properties. Whenever you purchase a rental property, you will be able to deduct the cost of the property over the span of several years. This can decrease your tax liability substantially. Property is not the only thing you can depreciate! You can use depreciation on cars, computers, office furniture, and other large purchases. You can depreciate these items alittle at a time over a span of years instead of applying it to the year you purchased them. If you would like to deduct the entire amount of the property in a single year you can do that as well under Internal Revenue Code Section 179.
2) Vehicle Deductions
You have the option of a tax deduction for all the driving you do to manage your rental properties, this does not apply to travel to and from your office though. You have a couple options to figure your annual deduction.
- You can use the standard mileage rate deduction which you simply only have to track the miles you drive for the business. In 2013, the standard mileage rate was 56.6 cents a mile and in 2014 the standard mileage rate is 56 cents a mile. It is best to have a log book in your vehicle at all times.
- Or you can track how much you spend on gas, oil changes, car washes, and repairs.
If you are thrifty, track both methods and see which works to get the largest deduction.
3) Office Expenses
The money you spend for office space and office supplies for the business is tax deductible. If you work at an outside office, you can write off the rent and utilities. If you work from home it is possible to deduct a portion of your utility payments relative to the size of the size of the office in the home. For example, if your office is 250 sq ft and your home is 1000 sq ft, you would be able to write off 25% of all utilities. It is a good idea to choose a large room to have your office. You must make sure the office will only be used for business though to get the deduction. If you are a renter and have a home office, you can actually deduct a portion of the monthly rent.
4) Business Travel
Whenever you travel for business purposes, it is a tax deduction. You can write off the airfare, lodging, and transportation costs. You can only deduct 50% of the cost for meals.
5) Meals and Entertainment
In order to deduct meals and entertainment, you have to have a very serious business discussion before, during, or very soon after the event. Again you can only deduct 50% off the cost for meals and entertainment. It is a good idea to write on the back of the receipt who was there and what business matters were discussed so you have a record of why it was deducted.
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