Whether you rent out a place or room to a tenant full time or just for a few weeks while you’re away on vacation, you already know it’s a great way to make money. But did you know it can also save you cash at tax time? That’s right, being even a part-time landlord comes with tons of rental property tax deductions you’ll want to take advantage of. Pass them up, and you’re essentially throwing wads of moolah out the window.
“You could be losing hundreds, if not thousands, of dollars in deductions,” says St. Petersburg, FL, Realtor® Lisa Cahill, a CPA and former tax manager.
One caveat, though: If you rent out part or all of your primary residence to others for fewer than 15 days out of the year, you can’t deduct any expenses. But on the other hand, you don’t have to report the money as rental income (meaning it’s tax-free).
However, if you rented out all or part of your home for 15 days or more in 2016, make sure you claim these tax deductions from Uncle Sam when you file before the deadline this year.
1. Rental service fees
If you found a tenant using a rental or home-sharing service like Airbnb, VRBO, or HomeAway, you paid the company a fee. Airbnb, for example, takes a 3% cut of whatever guests pay. But guess what? You can deduct that (annoying) fee as a business expense.
“Any fees that you paid directly as the host are tax-deductible,” says Lisa Greene-Lewis, CPA and tax expert at TurboTax. This is true even if it came off the top and never hit your bank account. In addition to this fee, you can deduct value-added tax, which may have been taken off the top, too.
2. Advertising fees
If you had trouble finding a renter, you may have paid for advertising outside of what was offered by the rental service. If so, that money is tax-deductible. Roommate-matching websites like Roommates.com, for instance, charge hosts a fee in order to read messages received from other members. (A 30-day membership is $20.)
Yes, your electric, heating, and water bills are also deductible, even if you live with your tenant. In the latter case, you’d just deduct a portion.
“How much you can deduct is based on the square footage of the space you rent out,” explains Greene-Lewis. So if a tenant is renting 1,500 square feet of the total 4,500 square feet, including living quarters and common areas, you’re allowed to deduct for one-third (1,500/4,500) of the utilities that you paid.
Tax deductions for vacation homes, meanwhile, are based on how many days the house is rented out compared with how many days you used it personally. For example, if the house is rented out for 90 days and used personally for 30 days a year for a total of 120 days, then you would be able to deduct 75% (90/120) of the utility costs.
4. Cleaning, gardening, and maintenance
“Whether you clean the house yourself or pay a professional cleaning service, the money is tax-deductible,” says Greene-Lewis. This includes cleaning supplies, which can add up, as well as gardening, lawn mowing, and other maintenance fees.
5. Repairs and painting
“If you have a handyman come to repair a window or repaint a room, those costs are deductible,” says Cahill. If you rent out a room in a home you live in and pay for whole-house maintenance, such as a furnace tuneup or a roof replacement, a part of that cost will be deductible as well, depending on the square footage devoted to your rental.
6. Property taxes
Property taxes work the same way: You can write off the portion of your property taxes equal to the portion of your home being rented out. These can be deducted either as personal expenses on Schedule A or deducted as rental expenses, says Cahill. (Here’s help on how to calculate your property taxes.)
7. Property insurance
If you need to pay more insurance on your home because you have renters present, you can deduct the extra cost. And even if your property insurance fees haven’t increased, you can still write off a portion of the expense as a business expense.
8. Furniture, linens, and food
If you buy new furniture for the space being rented out or provide renters with household items such as linens, curtains, and shower supplies, you can claim a tax deduction for those costs. Ditto for any food or drinks that you provide guests.
9. Municipality services
Some expenses paid to the local government, such as fees for trash and snow removal, are also tax-deductible.
10. Structural improvements
You can deduct the cost—or the interest paid on a loan, if you don’t pay cash—of structural improvements (like new roofing) made to the property if they apply to the rented area. (Depending on the project, you may also be able to snag a home improvement deduction.) However, these costs will need to be depreciated over time—meaning you won’t get all of the money back upfront, but will have to divvy it up over the life of the loan.