Essential Deductions Every Landlord Should Know: Expert Advice from Michael S. Gawel, CPA, JD

By Michael S. Gawel, JD, CPA

Rental Income

For Niagara Falls resident’s rental income is one of the most common forms of taxable income and one of the most misreported. People often start collecting rental income from a spare bedroom, garage apartment, upper apartment or inherited property but forget to report the income. This means they are also forgetting to take the deductions.

All amounts received for rent is included in gross income and reported on Schedule E.

Expenses attributable to property rented or held for rental are deductible in computing gross income; real estate taxes, mortgage interest, utilities, supplies, repairs and fees are all deductible.

There are special rules for home offices and vacation homes. Home office deduction expenses for the business use of the taxpayers home used exclusively on a regular and it is the principal place of business. The deduction must be based on the taxpayer’s actual expenses.

There are also special rules for vacation rentals. If the property is rented for fewer than 15 days during the year, rental expenses are not deductible and the rental income is excluded from the taxpayer’s gross income. (Code Sec. 280A (g))

If the property is rented for more than 14 days per year, rental expenses are deductible.

Many taxpayers fail to take depreciation of their rental properties. When you purchase a property the cost should be depreciated over the life of the property, or 27.5 years.

The key to getting the most out of your rental property is to keep good records of both your income and expense and record all expenses attributable to the production of income.

For any questions contact Michael S. Gawel, JD, CPA at [email protected]