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Don't Miss These Ten Deductions for Landlords

Surprisingly, many landlords don't claim all the tax deductions they are entitled to. What types of deductions are we talking about? Here are ten top deductions that may go by the boards.

1. Interest : This is usually the biggest deduction on the list. You can deduct mortgage interest on loans to acquire or improve your rental property plus other interest incurred for assets or services used in the rental activity.
   
2. Depreciation : Most likely, this is the second-biggest deduction item. Recover the cost of the  property through annual depreciation deductions based on the basis in the property. Residential rental property must be depreciated over a period of 27.5 years.
   
3. Local travel: Don't forget to keep track of auto or truck expenses that are related to rental activity. This is not limited to travel to and from the rental property; for instance, you can also deduct trips to the hardware or office supply stores. For simplicity, use the standard mileage rate (40.5 cents per mile for 2005 plus tolls and parking fees) to figure out your deduction.
   
4. Long-distance travel: If you are required to travel overnight for your rental activity, you can deduct your airfare, lodging and other related expenses (including 50% of the cost of meals). In addition, you can mix a little pleasure in-take a side trip or get in some golfing-as long as the primary purpose of the trip is related to rental activity. 
   
5. Repairs: The cost of "ordinary and necessary" repairs is deductible in the year in which they are incurred. These include expenses for repainting, fixing gutters and leaks, plastering and replacing broken windows. Note: The cost of improvements, as opposed to repairs, must be capitalized and added to your basis.
   
6. Insurance: You can deduct insurance premiums for your rental property including fire, theft, flood and landlord liability insurance. And, if you have regular employees, you can also write off the cost of health insurance and workers' compensation insurance.
   
7. Salaries and contractor fees: When you hire someone to work for your rental activity, you can deduct their wages as a business expense. Similarly, you can deduct fees paid to independent contractors-for example, a plumber or landscaper-to provide services for your operation.
   
8. Professional fees: Generally, you can deduct the fees paid to professionals-attorneys, accountants, property management companies, investment advisers and the like-to the extent the costs are attributable to your rental activity.
   
9. Home-office expenses: If you use a room at home for administrative tasks-and the activity has no other principal of business-you can deduct expenses attributable to a home office. For instance, you can deduct a percentage of regular home expenses (e.g., utilities and insurance) and the full amount of direct expenses (e.g., a separate telephone line). Caution: The use of the home office must be regular and exclusive.
   
10. Casualty losses: Finally, if your rental property is damaged or destroyed by a sudden event, including vandalism or theft, you may be able to claim a casualty loss for the damage suffered (less insurance reimbursements).

With professional assistance, you can make sure you claim all the tax deductions allowed under the law.

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