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Deductions That Can Be Claimed On Rental Income

First, you must know the meaning of rental income and what is included and excluded for income tax purposes.

Rental income is the income received from the rental or lease of real property such as apartments, houses, condominums and townhouses, commerical buildings and units, industrial property, and farm and ranch lands.

Other sources of rental income can come from the rent and/or lease of cars, trucks, and other utility vehicles, farm equipment such as tractors, combines, harvesters, bulldozers, farm and ranch buildings, cars, trucks, and utility vehicles, and other equipment.

Rental income can also be gained from royalties associated with patents, copyrights, and mineral rights.

Rental income does not include deposits held with the intent of returning to the rentor at the time the lease or rental period has ended and if the property has been rented for less than 15 days per year.

Rental income is calculated as the output of services from whatever is rented less any related expenses. These related expenses include mortgage interest, depreciation, and repairs or maintenance and whatever is paid in property taxes.

Deductions that can be claimed:

  • Commissions paid to rental agencies
  • Mortgage payments
  • Interest payments
  • Real estate taxes
  • Payments for maintanence of the property
  • Lawn services and trash collection
  • Pest control
  • Eviction services such as court costs and attorney fees
  • Cost of repairs such as painting
  • Depreciation of buildings on the land (not the land)
  • Depreciation of improvements
  • Depreciation of machinery and appliances
  • Cost of renting equipment
  • Cleaning supplies
  • Insurances (hazard, flood, liability, fire, etc.)
  • Tax preparation and advice
  • Advertisement costs
  • Transportation costs

If you rent a part of your property, there are certain expenses that can be claimed for the part of the property used for personal purposes and other deductions for the part that is used for rental purposes.

There are other items that can be claimed on your tax returns for rental income so it is recommended that you consult your accountant or tax preparer for a more detailed accounting of all the deductions you can claim.

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