What Are Tax-Deductible Expenses for Jacksonville Rental Properties?

Rental property tax deductions are something every property owner should know about. It can increase your net operating income, and you can allot it to other expenses or put it towards real estate investments.

What Qualifies as Tax-Deductible Expenses?

Tax deductions are operating expenses related to your rental business. These are usually classified as ordinary and necessary expenses. Ordinary expenses are those that are accepted in the rental industry, whereas necessary expenses are anything that is "helpful and appropriate."

List of Deductible Rental Expenses

1. Mortgage Interest

Interest paid on loans used to purchase or improve the rental property is fully deductible. You can hire a tax professional to do this for you, but there are accessible tools online, like mortgage interest tax deduction calculators, that you can use.

2. Property Taxes

The state and local property taxes on your Florida property count as tax benefits. You can calculate it using the formula: Property Tax = Assessed Value × Tax Rate. Like mortgage interests, property taxes are among the most complicated deductions on your taxable rental income, so consulting someone with expertise is advised to achieve accurate tax returns.

3. Depreciation

Rental property owners cannot avoid rental property depreciation, which is when a property loses its value due to normal wear and tear. For residential rental properties, the IRS uses a 27.5-year period for depreciation deductions.

4. Repairs and Maintenance

Expenses paid for broken appliances, property damage, and general property upkeep are deductible from your taxable income, as long as they are not considered capital improvements for your rental property. Make sure to keep records of maintenance and repair costs to avoid miscalculations.

5. Utilities

Unless the tenant pays for utilities, your bills are eligible as a rental property deduction. That includes electricity, water, gas, or other rental property expenses. If a portion of the rental is personal property, you will need to separate personal expenses, as they are not qualified rental expenses.

6. Property Management Fees

If you decide to hire a property manager or a property management company to oversee your rental real estate, you can deduct expenses incurred from the services. That includes maintenance, repair, and advertising costs that the property manager might spend on your rental property business.

7. Insurance Premiums

You can deduct the cost of premiums for landlord insurance, liability, fire, flood, and theft coverage. While liability insurance is often included in some plans, legal fees are also deductible for tax benefits.

Travel Expenses

Most real estate investors generally deduct travel expenses from travel related to rental management, whether it's local or long-distance. Keep in mind that this must be properly documented to qualify.

Pass-Through Tax Deduction

Other than actual expenses from your rental property, the Tax Cuts and Jobs Act created a qualified business income (QBI) deduction for pass-through business entity owners to deduct up to 20% of their business income.

Pass-through owners who qualify can deduct 20% from their rental property income taxes. To be eligible, your rental property must be a sole proprietorship, a partnership, an S corporation, an LLC, or an LLP.

Leave It to a Real Estate Professional

Companies like Green River Property Management work hard to maximize your rental income, but we also hold the expertise to balance your income and expenses. We take the stress out of rental property ownership, so all that's left is earning passive income.

Sounds good? Let's make it a reality. Contact us today and learn more about our services!