For Landlords: 5 Rental Property Tax Deductions in NYC

rental property tax deductions

Thousands of landlords in New York City pay more taxes than they have to – simply by failing to know the real estate tax deductions. If you think you’re one of them, we want to make sure that you’re getting a maximum return on your real-estate investment; therefore, we have compiled a thorough list of rental property deductions for professionals in New York City real estate.

1. Mortgage Interest

It is a common tax rule to deduct interest on money that you borrowed for a business or investment, which also applies to being a landlord. However, you can only deduct the interest you pay on a loan. You may not deduct the payments of principal – the actual repayments of the borrowed amount. Additionally, it is important to know that interest is deductible on the first $1 million of debt, as long as it is used for acquiring or improving primary or secondary residence.

2. Repairs and Improvements

There are two types of deductions that you need to consider when filing your taxes – “repairs” and “improvements.” There is an important distinction between these two: “repairs” can be deducted in the same year if they don’t exceed $500; “improvements” are usually larger expenses and cannot be deducted immediately.

For example, tasks such as changing the lock or fixing a hole in the wall are considered “repairs”, and are necessary in order to keep your property in good condition and habitable. But when it comes to larger expenses, such as remodeling the kitchen, it is categorized as “capital expense” and it cannot be written-off in the same year as they were executed. These expenses increase the value of your property and extends its life; therefore, you can only deduct small and even portion of these expenses each tax filing period.

3. Utilities

Any utilities paid on the rental property are considered deductible for tax purposes. For example, landlords may cover the expenses for water and heat, whereas tenants have to pay utilities such as electricity and trash removal. The landlord can deduct the expenses for heat and water, but not for electricity and trash removal.

4. Insurance

The landlord can deduct cost of insurance for the rental property. Homeowners’ insurance, as well as flood and/or earthquake insurances are also applicable.

5. Travel Expenses

While being a landlord, you will have to make trips between your primary and secondary real estate properties. The great news is that you can deduct these expenses. The standard mileage allowance provided by IRS is $0.55 cents per mile. If the property is a flight away from your home, you can also deduct costs such as airfare, hotel costs, and any other expenses retailed to your trips.

 

Morgan Glick

I write about New York and NYC real estate ventures, investments, tips, and community projects.

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