Tax Deductible Rental Property Expenses, Part 1

There are numerous deductible expenses linked with owning a rental property. In this write up we will focus on expenses regarding interest, advertising, and professional fees, these are expenses you may deduct from your gross rental income to calculate the net rental income.

Interest

If you’re renting a room in your home, or if it is a duplex and you’re occupying the other unit, you will need to pro rate the mortgage expense. (See the article titled Personal Use of Rental Property, included in this guide, for more on how to calculate personal use). Now if you are renting the property as its own living unit, you can deduct all of the mortgage interest you paid on Schedule E. Also, if you own only a part interest in the rental, you must multiply the total amount of mortgage interest paid on the property by your ownership interest. Be aware, however, that certain expenses you pay to obtain a mortgage (such as title/recording fees and commissions) are capitalized as part of your depreciable basis for the property, and are not expensed. See the article titled Depreciation Expenses for Rental Property, included in this Guide, for more on depreciation expense. Other types of interest may also be deductible, if you incurred the interest solely for the benefit of the rental property.

Advertising

Promoting your rental property on the open market, through marketing efforts such as posting newspaper ads or paying for internet marketing, is a tax deductible expense.

Professional fees

If you pay a lawyer to write a rental agreement or initiate court actions in order to evict a renter, it’s possible to deduct these expenditures. Additionally you can deduct fees paid to a Bellevue accountant for prepping the Schedule E of your return from the previous year. Make sure you pro rate the entire fee between the rest of your return versus the Schedule E portion of you return based on time spent. Any fees unrelated to the Schedule E appear on Schedule A as personal tax preparation expenses. Also any commissions or management fees to realty groups for overseeing your rental property are deductible as well.

Bellevue CPA has written numerous articles on accounting and tax related issues of interest to the small business owner. He is a graduate of Washington State University and the University of Washington School of Law with a Masters in Tax Law.

Bellevue CPAAbout Bellevue CPA
Bellevue CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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  • Huddleston Tax CPAs – Bellevue, WA
    Certified Public Accountants Focused on Small Business
    40 Lake Bellevue, Suite 100 Bellevue WA 98005
    (425) 273-6512

    Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching,
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