5 Major Tax Benefits Of Becoming A Landlord

tax benefits becoming a landlord

Have you considered investing in real estate and becoming a landlord, but decided against it? 

You may want to reconsider. Owning a rental property can be a wise long-term investment. 

Property values in cities across America continue to rise, and as they rise, so does the price of rent. Your initial investment can turn a quick and healthy profit. 

Most people are not accountants with a complex understanding of tax code. While becoming a landlord has its hassles and costs like maintenance and troublesome tenants, there are surprising tax benefits. 

Read on to discover five tax benefits of becoming a landlord. 

1. Transportation Costs 

Don't let geography keep you from owning rental property. 

One of the surprising benefits of owning rental property is the ability to deduct travel costs. 

This includes all travel to and from your rental properties as you deal with repairs and troublesome tenants, though this deduction does not cover any travel made for improvements to your property. 

This covers gasoline costs for travel to and from your properties. You have the option to itemize these deductions or use the IRS standard mileage rate. 

Say you see an exciting investment opportunity while living in Charlotte, but know you'll have to move away. Don't worry about it. 

The IRS allows for overnight travel expense deduction should you have to travel a long distance to make repairs on a rental property. The costs of airfare, meals, and hotel bills are deductible should you keep the proper verification. 

This deduction allows you to expand your investments across the country if the opportunity presents itself. 

2. Professional Repair Deductions 

People who often enter into the world of real estate investing and become landlords are those who have extensive knowledge of home repair. They are able to maintain their property and do necessary upkeep without hiring outside help. 

Even if you are handy, you may not have the time or ability to replace a whole roof on one of your properties. This is especially true if you enter into the world of commercial real estate. 

Often, commercial real estate requires specialized repairs you may not have the knowledge or ability to perform on your own. 

Though the ability to perform these tasks yourself is a cost-effective way to profit as a landlord, the inability shouldn't stop you from becoming a landlord. 

One of the most exciting landlord tax benefits is the independent contractor deduction. 

With this, you have the ability to deduct all the wages paid to an independent contractor to make repairs. 

Should you buy many properties, this deduction also covers the wages paid to a maintenance manager or anyone else you hire to perform upkeep on your buildings. 

3. Landlord Insurance and Liability Coverage 

If you own a home, a car, or run a business, you have to carry some form of insurance. If you own a rental property, you must have landlord insurance with liability coverage. Like homeowner's insurance, your rental property is subject to a plethora of unforeseen and unlikely catastrophe. 

Likewise, you may face a lawsuit. No matter what happens, you have to be properly covered. 

An important landlord tax tip to note is that you have the ability to deduct all insurance premiums paid on your property like fire, flood, theft, and liability. 

This deduction also extends to any employee you hire to maintain your properties. Using it allows you to deduct their health insurance should you provide this benefit, as well as workers' compensation insurance premiums. 

Budget your tax deductions with the use of a handy landlord tax calculator

4. Legal Fees 

Becoming a landlord means an increase in legal responsibility. 

Your life as a landlord may be full of wonderful, long-term tenants who keep their unit clean and always pay their rent on time. This may not always be the case. 

You may have to evict someone, or you may have to file a lawsuit against one of your tenants for breaking lease terms. 

It's impossible to know who is signing a lease, even if you've consulted their listed references and/or performed a credit check. 

An intimidating aspect, for sure, but the cost of these legal expenditures shouldn't keep you from owning a rental property. 

You have a financial advantage should any legal issues arise. The government allows you to protect your investment by offering a legal cost tax deduction that covers attorney and court fees. 

5. Home Office Deductions 

No matter whether you own and rent one house or own many apartment buildings and commercial rental units under an LLC, you are a business owner. 

This means you can deduct all your home office costs

To do so, you must show the IRS that your home is the primary place of business for your company. If you are a new landlord entering into the world of real estate investment, this is more than likely the case. 

If so, you can deduct all equipment and supply expenditures related to your home business operation based on a calculated percentage of home-usage. 

Becoming a Landlord 

There isn't a single method for how to become a landlord with no money. Every investment requires start-up capital. 

Though you'll need money to purchase property, don't let intimidating costs prevent you from any exciting opportunity. There is money to make. 

Due to a favorable tax code, the cost of becoming a landlord is cheaper than you think. All you have to do is find the right deductions to increase your profits. 

For more helpful, money-saving financial tips, keep checking out our website. Visit the Real Estate section of the Bootstrap Business Blog for more tips on becoming a landlord and property management.

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