When tax season rolls around, South Jersey landlords have an opportunity to significantly cut down their taxable income with the right deductions. But knowing what's deductible - and what's not - can be a bit of a puzzle. Are you keeping track of repairs, utilities, and property management fees? What about those smaller expenses, like travel costs for property inspections or even pest control services?
We can help. Let's go through our rental property deductions checklist.
Mortgage Interest
As a landlord in South Jersey, you can deduct the interest paid on loans that financed the purchase or improvement of your rental property. This deduction is especially helpful if you're paying interest on a mortgage taken out specifically for your rental, as it directly reduces your taxable income.
To claim this deduction, you must meet specific requirements: the property must be used solely as a rental, and the loan should be in your name. The IRS allows you to deduct only the interest portion of your monthly payments, not the principal repayment. Make sure you keep accurate records during the rental accounting process.
Landlord Tax Tips: Property Taxes
Don't forget property taxes on your property expense checklist.
As a rental property owner, you can deduct the amount you pay in property taxes annually, which helps with rental tax savings. This deduction applies to state, local, and even certain municipal property taxes.
For deduction optimization, it's important to keep records of your property tax payments, which are typically billed semiannually or quarterly, depending on your municipality.
Be aware of any assessments for local improvements. Special assessments for things like sidewalk repairs or new sewer systems are generally not deductible as property taxes but may qualify as capital improvements, which can be depreciated over time.
Repairs and Maintenance
These expenses cover the cost of ordinary and necessary repairs that keep your rental property in good operating condition. Examples of deductible repairs include:
- Fixing any leaks
- Repainting walls
- Replacing your windows
- Patching a roof
- Repairing a malfunctioning appliance
As long as these expenses are not part of a larger improvement project that enhances the property's value or extends its useful life, they are considered fully deductible repairs.
Maintenance expenses also qualify for deductions. These regular upkeep tasks are essential for maintaining the property's appeal to tenants and ensuring it remains in good condition. Keeping your rental well-maintained not only helps with deductions but can also improve tenant retention and rental income over time.
Tax Deduction Guide: Utilities
If you, as the landlord, cover utility costs for your rental property in South Jersey, such as:
- Water
- Gas
- Electricity
- Trash collection
you can deduct these expenses on your tax return.
The deduction applies to any utilities that are necessary for the property's operation and comfort. However, if tenants are responsible for some or all utilities, only the portion you pay as the landlord is deductible.
Use This Rental Property Deductions Checklist To Your Advantage
With this rental property deductions checklist, you'll be on top of things in no time.
Are you ready to bring in property management help in New Jersey? Check out PMI Property Service. Our franchise's decades of experience, along with our tax and accounting background, help set us apart from the rest.
Call us to learn more about what we can offer you.
