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Its tax time and if you are new to Tampa rental management you likely have questions about tax deductions on your Tampa rental property. The tax treatment of your Tampa property while under property management is quite different to your primary residence. The good news is that a lot of your expenses as a landlord can be deducted to offset your rental income. Generally you will be able to deduct the following rental expenses:
Your property management expenses such as management fees and leasing fees are deductible.
If you have a mortgage, the interest you pay each year (that is reported to you on a 1098) is deductible.
Your property taxes are deductible. So are "hidden taxes" such as rental permits and licenses.
Your hazard insurance, and if applicable flood insurance and liability insurance, are deductible expenses. So are the cost of inspections required by your insurance carrier. such a Four-Point Inspections and the Citizens Insurance roof and subsidence inspections.
If you pay for utilities such electric, gas, water, sewer or trash these are deductible expenses.
Any cleaning and painting we do to your property between tenants is deductible.
Generally, if you make repairs and maintenance to your rental property, these expenses are fully deductible. So for example, yard service, plumbing repairs and AC repairs are permissible deductions. However, you will want to be careful not to have a broader definition of “repairs and maintenance” than the IRS. That fence you just replaced because it was falling apart might seem like repairs and maintenance to you as a landlord, but to the IRS it is an “Improvement” and has to be depreciated over 15-years. That new AC system you just installed is also considered an “Improvement” and has to be depreciated over 27.5-years. Generally new appliances and carpeting must be depreciated over 5-years; fencing over 15-years; roofs, air conditioning, bathtubs, lighting fixtures and additions over 27.5 years. Then, there are gray areas, for example, should a roof repair be expensed or should it be depreciated? What depreciable costs can be expensed under Sec-179? This is an area where you should either become familiar with the tax code or consult a tax professional.
Generally residential rental properties are depreciated over 27.5-years and you can deduct a portion as depreciation expense each year.
The IRS produces a helpful guide on the tax code governing rental properties called Publication 527. If you have specific questions about the tax code or if you are unsure what is a permissible tax deduction, you should always consult a tax professional.