Did you know that practically all of your expenses related to operating a rental property are deductible? When tax time rolls around every year, you’ll have to determine your rental property’s annual profit or loss. The vast majority of your expenses when it comes to the rental property can be deducted from the income it generates, reducing the taxable part of your rental property income.
Here are just a few of the operating expenses you can deduct:
- Property management fees
- Property taxes
- Maintenance, cleaning, and repairs
- Advertising for new tenants
- And more!
By subtracting these expenses from the income generated by your rental property, you can illustrate your overall profit for tax purposes. Because owning a rental property is considered a passive business activity, you typically cannot deduct losses; however, losses can offset passive activity profits, and excess can generally be carried forward into tax years when your passive activity income is sufficient to absorb the loss.
Be aware that if you pay any individual or company $600 or more for any of the services listed above during a tax year, you will be required to issue them a 1099MISC.
Have questions about rental property operating expenses? Not sure how to handle a rental property loss? Taxation Solutions, Inc. is standing by to put our 40 years’ experience to work for you. Call today to get expert tax help!