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Taxation of Rental Properties

Tax optimization of rental properties

Whether you have rented out one unit on a whim or manage an empire of rentals, there are quite a few deductions to be aware of:

  • You can depreciate your residential property over 27.5 years if you rent it out. The depreciation can be a great deduction on your returns. Do not skip your depreciation – there may be long-term penalties for doing so.
  • Mortgage interest and real estate tax are deductible. However, any expenses you pay to get a mortgage are not deductible. Instead, these expenses will increase your basis in the property.
  • If you are a real estate agent or full-time real estate professional, you can use the loss from rental property to offset your ordinary income. This may not be the case if you have a full-time occupation unrelated to real estate. Contact us to learn more about how aggressively (or not) you can deduct.
  • You can deduct the cost of repairs in full if the amount is not large. You will need to capitalize the cost and depreciate it over the useful life if the amount is significant.
  • Setting up an LLC for the rental property can limit your personal liability and keep your business & personal expenses separate.
  • Income from rentals may be eligible for the 20% Qualified Business Income deductions.
  • You may be responsible for state & local tangible property taxes, in some jurisdictions. Contact us to learn more.

For further information on tax strategy for landlords, please feel free to reach out to us at We specialize in rental properties. Our experience with rentals is personal as well as professional, as both our clients as well as ourselves own rental income properties.

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