Tax Optimization for Rental Properties

Whether you rent out a single unit or manage a large portfolio, there are several key deductions to consider

  • Depreciation You can depreciate your residential rental property over 27.5 years. This depreciation can provide a significant deduction on your tax returns. Ensure you claim this deduction to avoid potential long-term penalties.
  • Mortgage Interest and Real Estate Taxes Both mortgage interest and real estate taxes are deductible. However, expenses incurred to obtain a mortgage are not deductible; instead, they increase your property’s basis.
  • Real Estate Professional Status If you are a real estate agent or a full-time real estate professional, you can use rental property losses to offset your ordinary income. This may not apply if your primary occupation is unrelated to real estate. Contact us to determine how aggressively you can deduct these losses.
  • Repair Costs Small repair costs can be deducted in full. For larger expenses, you need to capitalize and depreciate the cost over the asset’s useful life.
  • LLC Formation Establishing an LLC for your rental property can help limit personal liability and separate your business expenses from personal ones.
  • Qualified Business Income Deduction Rental income may qualify for the 20% Qualified Business Income deduction.
  • State & Local Taxes You may be liable for state and local tangible property taxes in certain jurisdictions. Contact us to learn more about your specific obligations