The affordability of housing plays a vital role in ensuring that people of all income levels have access to safe and affordable housing. If you’re a U.S. resident who owns or manages rental property designed to provide affordable housing, you may be eligible for certain tax benefits. Understanding what expenses are tax deductible for rental property can significantly impact your financial bottom line.
In this blog, we will explore the key deductions available to you as an owner or manager of affordable housing properties.
Mortgage Interest
The mortgage interest deduction is among the biggest benefits offered to owners of rental properties. Interest on loans taken out to buy, renovate, or maintain the property is included in this cost. Owners of properties with affordable housing may deduct this amount, which will lower their taxable income and, eventually, their tax obligation.
Property Depreciation
Property deduction is another beneficial deduction for owners of real estate used for affordable housing. You can claim an annual depreciation expense and deduct a portion of the property’s worth from your taxes, according to the Internal Revenue Service (IRS). Your total taxable income may be reduced by this expense by offsetting your rental revenue.
Property Maintenance and Repairs
Whether or if it is inexpensive, owning rental property entails property maintenance. Tax deductions apply to costs for maintenance and repairs that are required, such as replacing a roof, painting, or repairing plumbing problems. To get the most deductions possible, thorough documentation of these costs must be kept.
Utilities
If you, as the property owner, are responsible for paying utilities, such as water, electricity, gas, or garbage collection, you can usually deduct these costs from your taxable income. Affordable housing property owners often include utilities in their rental packages for their tenants, which makes these deductions especially relevant.
Property Management Fees
If you hire a property management company to oversee your affordable housing rental property, you can deduct their fees. Usually, these fees cover a range of services, such as collecting rent, maintaining the rental property, and screening potential tenants. To be eligible for the deduction, make sure you maintain a record of these costs.
Insurance Premiums
To safeguard your investment, property insurance is essential. Your property insurance premiums, which cover liability, theft, and fire damage, are deductible. This expenditure is essential to maintaining the safety and functionality of your affordable housing asset.
Legal and Professional Fees
You may also be able to deduct professional and legal fees from your rental property taxes. This covers costs for professional services like tax preparation, accountancy, and legal advice. Owners of affordable housing properties should maintain documentation of all costs incurred for these services.
Advertising and Marketing
You can deduct advertising costs you incur to attract qualified tenants for your rental property that offers affordable housing. The price of making rental listings, marketing the rental property, and checking prospective tenants’ backgrounds can all be included in this.
Travel Expenses
Travel expenses are often deductible if you have to go to your rental property for upkeep, inspections, or other legitimate reasons. Transportation, housing, and food are included in this, but it’s crucial to maintain accurate documentation and only submit claims for costs that are directly associated with your rental property.
Home Office Deduction
You can qualify for a home office deduction if you keep an office area at home that is solely utilized for managing your rental property effectively. This deduction can be used to pay for things like utilities, home office supplies, and a percentage of your rent or mortgage.
Conclusion
As a U.S. resident managing affordable housing rental property, it’s important to understand the tax benefits available to you. By taking advantage of these tax deductions, you can reduce your overall tax liability and maximize the financial sustainability of your affordable housing investments. However, tax laws and regulations can be complex and subject to change, so it’s advisable to consult with a tax professional or seek guidance from the IRS to ensure you’re taking full advantage of all available deductions while staying compliant with tax laws. Ultimately, by understanding what expenses are tax deductible for rental property, you can continue to provide affordable housing while also securing your financial future.
