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Rental Property Tax Deductions in Los Angeles

by | 0 comments | Aug 7, 2020 | 10 min read |

As a rental property owner, you incur more expenses than the everyday homeowner. Your rental property is a business, requiring the kind of additional services and professional assistance that is absent from one’s personal home. 

When you’re renting out a property in Los Angeles, you can see big savings during tax season, making a rental home a lucrative and greatly beneficial investment for a Los Angeles real estate investor. The Internal Revenue Service (IRS) allows for several tax breaks when you own a rental property, making even repairs and renovations more affordable and helping to create a larger profit at year-end.  

Before we begin, we always advise to consult with a tax and accounting professional for the most relevant and appropriate in your area.

This is what you need to know about rental property tax deductions in Los Angeles.

What are Rental Property Tax Deductions?

If you own a rental property, you have the ability to deduct reasonable expenses, so your annual taxes don’t spiral out of control each year. This includes things like repairs and other costs that are associated with the management and maintenance of your rental property.

Rental property tax deductions can include any number of fees, taxes, and expenses that a homeowner would typically pay but are exempt for the rental property owner.

Before you make any purchase, we at Onerent suggest that you first consult the advice of a licensed legal or tax professional who can advise you on the best course of action for your investment portfolio. They may have additional advice associated with the tax benefits of rental property.

How Tax Deductions Make for Profitable Rentals

Depending on where you live, you can leverage existing laws to create bigger returns from your rental property. There are several ways to generate revenue and turn a profit from your rental property.

Mortgage

Your mortgage works for you when you have a rental property. The IRS lets you save with deductions for interest paid on your rental property mortgage, often giving you the biggest tax break for your rental property. You can deduct much of the interest that you pay on your loan, regardless of whether your loan was used to buy the property or make improvements. 

We generally think of the primary loan used to acquire a property, but you can save money in other ways. Home improvements for your rental can be tax-deductible expenses that can not only improve the value of your home but can also give you money back at tax time and add to the tax benefits of rental property. 

The interest on your home equity line of credit (HELOC) is one place that you can save on interest. Credit card interest is also a popular deduction for rental property owners who use these accounts to make qualifying purchases related to the property.

Expenses

There are some expenses that are reasonably expected for the average property owner, so the IRS gives you a break. 

Purchases you make toward the maintenance and improvement of your home can be tax-deductible. Your vehicle and travel expenses can also save you money on taxes when used toward the management of your rental.

Your home business office can be a write-off, too, with tax discounts on some things like utilities, insurance, and repairs. You could potentially save on the mortgage you pay for your home if you can show an eligible, dedicated space used to manage your rental operation.

Examples of Improvements – IRS.gov
Additions Miscellaneous Plumbing
Bedroom

Bathroom

Deck

Garage

Porch

Patio

Storm windows, doors

New roof

Central vacuum

Wiring upgrades

Satellite dish

Security system

Septic system

Water heater

Soft water system

Filtration system

Lawn & Grounds Heating & Air Conditioning Interior Improvements
Landscaping

Driveway

Walkway

Fence

Retaining wall

Sprinkler system

Swimming pool

Heating system

Central air conditioning

Furnace

Duct work

Central humidifier

Filtration system

Built-in appliances

Kitchen modernization

Flooring

Wall-to-wall carpeting

Insulation
Attic

Walls, floor

Pipes, duct work

Services

Often when you own a rental property, you have a little help running it. There are lawyers and tax professionals, property managers, realtors, and even employees of your own. 

The IRS makes it easier for the average rental property owner to receive help. If you choose to hire a property manager, those services are tax-deductible, so you can benefit from more affordable professional support. 

While there is a difference between employees and independent contractors, you could potentially save on the wages and benefits paid to your internal employees, such as a property manager, handyman or cleaning service on your payroll. For these services, be sure to track all expenses through receipts and invoices for your tax return.

Types of Rental Property Tax Deductions 

There are many kinds of property tax deductions for rental property owners. 

These are some of the most common types.

Type of Deduction Examples 
Taxes
  • Property tax
  • Sales tax
  • Occupancy tax 
  • Employee tax 
Mortgage
  • Loan interest 
  • Loan fees, such as origination fees
  • Credit card interest on property-related expenditures
Insurance
  • Homeowners insurance 
  • Peril insurance
  • Liability insurance
Property Expenses
  • Depreciation
  • Maintenance and repairs
  • Utilities
  • Professional Services, such as legal fees and related services

The types of deductions will ultimately depend on what kind of property you own and where your property is located in Los Angeles. Your professional tax consultant can provide a more detailed portrait of your tax deductions and overall savings. 

Property taxes vary from the Federal, State, and County level. Onerent recommends consulting with a tax attorney or CPA for the best advice when filing your taxes. 

Key Takeaways for Los Angeles Landlords

Savvy Los Angeles rental owners know their rental property is a business, therefore they treat it as such. They account for the investment property tax deductions through their monthly spending and turn a profit each year from the many tax deductions made available each year by the IRS.

There are many different kinds of deductions that you can leverage to reduce how much you pay each year on everyday, regular expenses like interest, tax, and even credit card fees. While these may change from year to year, you should always be prepared to pull out your accounting books when it comes time to file your taxes. You should always consult with a tax or legal professional who can provide detailed counsel for your specific property.

When you own a rental property in Los Angeles, you certainly stand to earn significant savings at tax time when you file using the many deductions available to you.

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About the Author
Lena Borrelli is a freelance financial writer from sunny Tampa Bay who has worked with such leading industry titans as Morgan Stanley, Wells Fargo, and Simon Corporation. Her work has most recently been published on sites like TIME, Bankrate, Fiscal Tiger, The Simple Dollar, ADT, and Home Advisor.

This content is designed to convey information only. Any information here is not intended to provide legal advice and should not be taken as such. Consider obtaining legal advice from your attorney about any decision or contemplated course of action.

About the author

Avatar
Lena Borrelli

Lena Borrelli is a freelance financial writer from sunny Tampa Bay who has worked with such leading industry titans as Morgan Stanley, Wells Fargo, and Simon Corporation. Her work has most recently been published on sites like TIME, Bankrate, Fiscal Tiger, The Simple Dollar, ADT, and Home Advisor.


This content is designed to convey information only. Any information here is not intended to provide legal advice and should not be taken as such. Consider obtaining legal advice from your attorney about any decision or contemplated course of action.


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