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Just for Property Managers

By Jennifer

Renting out a home can offer some significant tax breaks for homeowners. Here are some tips on how to take advantage of your rental home’s potential tax benefits.


In order to calculate taxes properly, you’ll need to know how much your home worth. A professional appraisal holds the most weight, but written estimates from several realtors, as long as they match, will also do. Be sure these estimates agree when it comes to how much of the appraised value goes to the land, and how much to the house itself.

Rent vs. expenses

The next step is to figure out how much the property will bring in monthly rent and then to measure that income against taxes and costs.

As a landlord, you are able to deduct mortgage interest costs, property taxes, maintenance, insurance and property manager fees from your rental income. If you live out of town, you can also deduct travel costs. Be sure to check in with a professional tax advisor for all of your deductible options.

Depreciation is another significant deduction for landlords. The tax code allows you to divide the value of the house only (as determined by the appraisal) by 27.5 and deduct that number as an annual depreciation expense.

Your rental is a business

To justify possible deductions and keep your rental records in order, treat your rental property as a business. That means keeping track of every transaction related to it: rent, expenses, tax receipts, etc. Many experts also recommend a separate checking account for your rental property to make it easier to keep track of what it brings in and what it costs to own and maintain.

If you sell your rental home

To avoid capitol gains tax, landlords can do a 1031 tax-free exchange in which the funds from the rental sale are rolled immediately into another investment property. Owners who don’t make this type of reinvestment or who don’t do it properly will owe taxes on the sale of their rental home.

Can you benefit from the tax breaks of a rental home? Do the calculations above and you just may discover some extra benefits of being a landlord.

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