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Tax Breaks To Suggest to Rental Property Owners

By: Dan Coconate


real estate agent holding house key to his client after signing contract agreement in office,concept for real estate, moving home or renting property.

Rental properties are an excellent and ongoing investment but are even better when the owner of the property understands the number of tax credits and other breaks they can apply for. Let your rental property clients know about the following ways to increase their return on investment. If they’ve borrowed money from you this is a good way to help their business and by extension help your own. Here are several tax breaks to suggest to rental property owners.

Interest as a Tax Shield

Mortgage interest is a large expense. Usually, it’s the largest amount of money paid by a property owner. While this may be a financial burden, it’s also a benefit. Mortgage interest is deductible, and so is the interest on other loans used to buy the property or to improve it. Even the interest in credit cards, when used for rental-related work and activity, is deductible. Let investors know to save their receipts and records.

Improvements and Repairs

When you repair or otherwise improve a rental property, there’s a chance the expense is deductible. But not always! Repairs, for example, on things such as fixing the plumbing, painting the interior and exterior, replacing the roof, and similar tasks might be deductible because they handle normal wear and tear.

Improvements, on the other hand, address large projects such as building a new room or renovating another one. These are capital expenditures and are not deductible.  On the other hand, they do depreciate. It’s a more complex subject you should address with your clients.

Operational Costs

Anything that can aid in keeping the rental property rented might qualify for a deduction. Tell them to keep track of all their expenses, from basic maintenance and managing the utilities to insurance and advertising the rental’s availability. Nothing is too small to record and bring up with the tax preparer or accountant come tax time, so keeping and retaining accurate records and receipts is paramount. A savvy property owner can reap huge benefits from little expenses.

Energy Savings = Tax Savings

Here’s the last of the tax breaks to suggest to rental property owners. When they choose a cooling system for their property, they should keep energy efficiency in mind. Tax credits are available for mini split systems that meet energy efficiency criteria set by the federal government. Carry this over to other energy-efficient appliances like dryers, washers, water heaters, and furnaces, as well as energy-efficient home improvements such as windows and doors.

Those are just a few suggestions to bring up during client meetings. They’ll appreciate the advice and you’ll both appreciate the savings!

Published: May 30, 2024

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